Key Takeaways:
- As the cannabis industry faces economic challenges, litigation in the sector is increasing.
- The key litigation trends to watch involve cannabis-related gun bans, municipal disputes, illegal product diversion, receiverships, and corrupt or flawed cannabis licensing.
Cannabis-related gun bans
Despite the legalization of cannabis in many states, cannabis users are still prohibited from owning or possessing firearms under federal law. This issue has been challenged in federal courts, and there is a growing belief that these gun bans will be held unconstitutional.
Municipal litigation
In some cases, cities and counties that have legalized cannabis may still regulate against it. Municipal litigation arises when local governments attempt to restrict or ban cannabis activity through zoning and permitting regulations.
Illegal product diversion and other “bad boy” behavior
Lawsuits alleging illegal activity and bad corporate behavior are on the rise in the cannabis industry. The prevalence of the illegal market, combined with federal illegality, has created an environment where lawsuits related to product diversion and corporate fraud are becoming more common.
Receiverships and insolvency
Cannabis companies facing financial difficulties often turn to receivership as a means of resolving their issues. Receivers are court-appointed third parties who take over the operations of distressed businesses. As the number of struggling cannabis companies increases, receiverships and insolvency-related litigation are becoming more prevalent.
Corrupt or flawed cannabis licensing
The competitive and expensive nature of cannabis licensing can lead to lawsuits alleging corruption, flawed processes, and arbitrary decision-making. Unsuccessful applicants may challenge the outcome of the licensing process, while corruption claims against government officials involved in licensing are also on the rise.
Conclusion
As the cannabis industry navigates economic challenges and complex legal landscapes, litigation is becoming a significant factor. Cannabis entrepreneurs and businesses should stay informed about these litigation trends to protect their interests and ensure compliance with evolving regulations.
FAQs
1. Is cannabis-related gun bans a constitutional issue?
Federal courts are starting to question the constitutionality of cannabis-related gun bans, but the issue is still being debated.
2. What is receivership?
Receivership is a legal remedy where a court appoints a neutral third party to take control of a distressed business and manage its operations during a problematic period.
3. Can applicants challenge the outcome of cannabis licensing processes?
Yes, unsuccessful applicants can file lawsuits alleging corruption, flawed processes, or arbitrary decision-making in competitive cannabis licensing contests.
