Federal courts refuse to enforce marijuana contracts despite state laws
Federal courts confirm marijuana contracts are unenforceable under federal law.
Why it matters: This ruling clarifies that cannabis businesses cannot rely on federal courts to enforce contracts, despite state legalization. Legal practitioners must navigate heightened risks in contract enforcement within the marijuana industry.
- The Third Circuit remanded Apical Biotek LLC v. Maitri Holdings LLC to assess federal illegality of marijuana contracts.
- The Tenth Circuit in Bartch v. Barch upheld denial of enforcement of a marijuana-related promissory note.
- Other federal courts, including in Oregon and Colorado, have declined to enforce cannabis contracts citing the Controlled Substances Act.
- Texas appellate court ruled marijuana manufacturing contracts illegal under federal law and unenforceable.
- Public policy and the Controlled Substances Act underpin federal courts’ refusal to enforce such contracts.
Despite state laws legalizing marijuana, federal courts continue to hold that contracts related to marijuana businesses are unenforceable due to federal illegality. The Controlled Substances Act (CSA) classifies marijuana as a Schedule I controlled substance, which leads courts to refuse enforcement of contracts that would violate federal law.
In Apical Biotek LLC v. Maitri Holdings LLC, the Third Circuit remanded the case to determine if the contract at issue involved federally illegal transactions, making it unenforceable in federal court. Meanwhile, in Bartch v. Barch, the Tenth Circuit affirmed a district court's refusal to enforce a promissory note linked to a marijuana business, citing the CSA and public policy concerns.
Other federal decisions have reached similar outcomes. The U.S. District Court for the District of Oregon noted that since the CSA criminalizes marijuana activity, contracts tied to it cannot be enforced in federal courts. Similarly, in the District of Colorado, a breach of contract claim related to a marijuana business was dismissed for violating federal law and public policy (Sensoria, LLC et al v. Kaweske).
State courts sometimes align with federal law. For example, the Texas Court of Appeals reversed a trial court’s enforcement of a contract involving marijuana manufacturing, ruling it illegal under federal standards and thus unenforceable (BRCC Enters. LLC v. Skie).
The prevailing legal principle is well summarized by Curaleaf’s appellate brief: "Under black-letter law, this contract to violate federal law is void and unenforceable, and both parties should have known it." This underscores the critical risk cannabis operators face in federal courts when entering contracts.
By the numbers:
- 2026 — Year Third Circuit issued Apical Biotek decision remanding contract legality determination
- 2024 — Year Tenth Circuit upheld Bartch v. Barch denial of marijuana contract enforcement
Yes, but: Despite these federal rulings, state courts may provide enforcement avenues, but they carry risks given federal preemption and lack of uniformity.
What's next: Ongoing litigation and appeals will likely continue to clarify the interplay between federal enforcement and state legalization frameworks for cannabis contracts.