Key Takeaways
- A Michigan jury awarded cannabis grower Hello Farms $31.8 million for breach of contract. The Sixth Circuit reversed it in September 2026.
- The contract was voided because performing it required violating the federal Controlled Substances Act, not because the parties failed to form an agreement.
- Marijuana’s 2026 move to Schedule III did not retroactively legalize the 2020 contract. Courts judge a deal’s legality by the law in effect when it was signed.
- The rescheduling only covers qualifying medical marijuana. This contract required product meeting recreational testing standards, so it fell outside that exception.
- Schedule III substances are still federally controlled. Rescheduling is not the same as legalization, and lawful distribution can still require DEA and FDA approval.
- State licensing does not override federal law. Michigan authorized the deal, but that authorization couldn’t make it legal under federal law.
- Curaleaf’s subsidiaries benefited from the deal, then used its illegality to avoid paying the judgment. The court allowed it, since the doctrine blocks enforcement of unlawful conduct rather than rewarding fair play.
- Forming a contract and getting a court to enforce it are two different legal questions, especially in regulated industries like cannabis.
Frequently Asked Questions
Did marijuana rescheduling to Schedule III make cannabis contracts enforceable?
No. Schedule III substances are still federally controlled. Rescheduling changed how marijuana is classified going forward, but it did not retroactively validate contracts formed while marijuana was Schedule I, and it did not remove other federal requirements like DEA registration or FDA approval.
Why did the Sixth Circuit overturn a $31.8 million jury verdict in the Hello Farms case?
The court found that awarding lost profits would require a federal court to enforce a contract whose performance violated the federal Controlled Substances Act. The jury’s finding of breach wasn’t in dispute. The problem was that federal courts cannot provide a remedy for a bargain that requires illegal conduct.
Does a state cannabis license make a marijuana contract legal under federal law?
No. A state license shows what the state permits. It has no authority to override a federal prohibition. When state and federal law conflict, a federal court applies federal law.
Is the law that applies at the time of signing or at the time of the lawsuit?
Generally, courts assess a contract’s legality based on the law in effect when the parties formed the agreement, not the law in effect when a dispute reaches court. In this case, marijuana was Schedule I in 2020, when the contract was signed.
Does this ruling mean all cannabis-related contracts are unenforceable?
No. The court distinguished between a contract that directly requires cultivating, possessing, or distributing marijuana and one for services like accounting, construction, or software that happens to support a cannabis business. The latter involves different legal conduct and is not automatically affected by this ruling.
Can a party benefit from a contract and then use its own illegality as a defense?
Yes, and that’s what happened here. Curaleaf’s subsidiaries participated in the deal and later argued its illegality to avoid paying the verdict. The court acknowledged this could look unfair but explained the doctrine exists to keep courts from enforcing unlawful conduct, not to decide which side acted more fairly.
Does the medical marijuana rescheduling cover recreational marijuana contracts too?
No. The 2026 rescheduling order applies to qualifying medical marijuana. The Hello Farms contract required product meeting recreational testing standards, so it fell outside the scope of that exception even after rescheduling took effect.
Imagine winning at trial. A jury hears the evidence, sides with you, and hands down a $31.8 million verdict. Then, months later, a federal appeals court looks at the exact same facts and says: none of that matters. The money is gone.
That’s exactly what happened to a Michigan cannabis grower in its fight with two Curaleaf subsidiaries — and the reason why is one of the more counterintuitive lessons in contract law: agreeing to something and being able to enforce it in court are not the same thing.
The Deal That Looked Bulletproof
In November 2020, Hello Farms Licensing MI struck what’s known as an “output contract” with GR Vending MI and CURA MI, two Curaleaf-affiliated entities. The concept is simple: GR Vending agreed to buy whatever marijuana Hello Farms grew during its 2020 and 2021 harvests. CURA MI backed up that promise as guarantor.
On paper, this deal had everything a first-year law student would look for:
- A clear promise to grow and supply product
- A clear promise to buy it
- Testing requirements spelling out quality standards
- An actual deposit changing hands
- Both sides performing under the agreement for a while
Then GR Vending stopped taking deliveries. Hello Farms had to unload its harvest elsewhere at fire-sale prices and sued to recover the profits it lost. A jury agreed the contract had been breached and awarded Hello Farms roughly $31.8 million.
Case closed, right?
The Twist: A Legal Contract Can Still Be an Illegal One
Here’s where the story takes its sharp turn. The defendants argued that fulfilling this contract required growing, possessing, and distributing marijuana — and under the federal Controlled Substances Act, all three of those acts were still crimes, regardless of what Michigan’s cannabis laws allowed.
The Sixth Circuit Court of Appeals agreed. In a September 2026 ruling, the court held that a federal court simply cannot award profits from a deal that required the parties to break federal law — no matter how legitimate that deal looked under state law, and no matter what a jury decided about the breach itself.
This is the crux of the whole case: the court never said the parties didn’t have a contract. It said it couldn’t help them enforce it.
Michigan had licensed and regulated this exact activity. But a state license doesn’t repeal a federal statute: it just tells you what your state permits. When state and federal law collide, a federal court answers to federal law.
“But Didn’t Rescheduling Fix This?”
While the appeal was pending, something big happened: the federal government moved FDA-approved marijuana products and state-licensed medical marijuana into Schedule III — a meaningfully less restrictive category than Schedule I. Hello Farms saw an opening and argued this development should revive its judgment.
The court shut the door on that argument for three distinct reasons, each one worth remembering:
1. The clock started ticking in 2020, not today. Courts generally judge whether a deal was legal based on the law that existed when the parties signed it — not the law as it exists by the time a dispute reaches an appellate courtroom. In 2020, marijuana was Schedule I, full stop.
2. This wasn’t a “medical marijuana” deal. The rescheduling only touched qualifying medical marijuana. But Hello Farms’ contract required product that met recreational testing standards, and GR Vending had the ability to route inventory into the recreational market. The deal fell outside the narrow lane the new rule carved out.
3. Rescheduling isn’t the same as legalizing. Even a Schedule III substance is still a controlled substance. Making and distributing it can still require DEA registration, FDA approval, and a stack of other federal clearances. Moving marijuana down a schedule didn’t hand every state-licensed operator a blank check.
An Uncomfortable Kind of Fairness
There’s something that feels almost unjust here. Curaleaf’s subsidiaries willingly entered this deal, took the benefit of it, and then used the deal’s own illegality as a shield to avoid paying what a jury said they owed.
The Sixth Circuit didn’t pretend otherwise. It acknowledged the outcome could look like a windfall for the defendants — and it didn’t care, because that’s not what this legal doctrine is designed to police. The question isn’t “who behaved better?” It’s “can a federal court use its power to enforce something federal law forbids?” The court decided the answer was no, even if that meant leaving Hello Farms empty-handed.
The Bigger Lesson: An Agreement Is Not Necessarily Enforceable
This case draws an important distinction between forming an agreement and obtaining a legal remedy for its breach. The jury found that the parties made a contract and that GR Vending failed to honor it. But that did not end the inquiry. A federal court also had to consider whether awarding lost profits would effectively enforce conduct prohibited by federal law.
The decision does not mean that every contract involving a cannabis business is unenforceable. The relevant question is what the agreement actually requires the parties to do. A contract for accounting, construction, software, or another otherwise lawful service presents a different issue from a contract requiring the cultivation and sale of marijuana.
For businesses in heavily regulated industries, ordinary contract protections are therefore only part of the analysis. The parties must also consider whether performance is lawful under every applicable legal regime, what approvals are required, and how the agreement allocates the risk of a change or conflict in the law.
The Takeaway
Hello Farms persuaded a jury that GR Vending breached its promise and caused substantial losses. Even so, the Sixth Circuit concluded that a federal court could not award profits from performance that violated federal law when the agreement was made.
The later move to Schedule III did not change that conclusion. It did not retroactively alter the law governing the 2020 agreement, and the contract did not fall within the rescheduling rule’s medical-marijuana exception.
The lesson is not that the agreement never existed. It is that proving a contract and proving a breach do not necessarily entitle a party to a remedy. When performance itself is unlawful, a court may leave the parties where it finds them—even when that result appears to reward the party that broke its promise.
