Sixth Circuit Kills $31.8 Million Verdict: Federal Courts Won't Enforce Marijuana Contracts, Period

A Michigan marijuana grower just learned the hard way that state legalization means nothing in federal court.

The U.S. Court of Appeals for the Sixth Circuit ruled on September 10 that federal courts cannot enforce a marijuana supply contract, reversing a $31.8 million jury verdict Hello Farms Marketing MI had won against GR Vending MI and CURA MI, subsidiaries of Curaleaf Holdings, according to The Marijuana Herald.

What Actually Happened

Hello Farms entered a contract with GR Vending in November 2020. GR Vending agreed to buy every pound of marijuana Hello Farms grew during its 2020 and 2021 harvests, with CURA MI guaranteeing the deal, The Marijuana Herald reported. The contract anticipated 12,000 to 15,000 pounds from the 2020 harvest alone.

Hello Farms delivered. It grew roughly 16,300 pounds, all of which passed required testing. GR Vending accepted about 2,000 pounds, then marijuana prices dropped and the company walked away from the rest of the deal.

Hello Farms sued for breach of contract. A jury sided with the grower and awarded $31.8 million. The district court rejected the defendants' argument that the contract couldn't be enforced because marijuana remains illegal under federal law.

The Sixth Circuit reversed that call entirely. Writing for the court, Judge Nalbandian noted the contract wasn't even confined to Michigan's medical marijuana carve-out. It specifically required product that satisfied recreational testing standards, and GR Vending held both medical and recreational licenses, according to The Marijuana Herald. "On the face of the contract, the parties promised to commit felonies," the court found.

As Jonathan H. Adler, a law professor at William & Mary and senior fellow at the Property and Environment Research Center, put it in his Reason Magazine analysis of the ruling: "despite the legalization of marijuana in Michigan, federal courts cannot enforce agreements to commit federal crimes." Marijuana growth, distribution, and possession remain crimes under the Controlled Substances Act, and Adler notes that two-dozen states have legalized adult possession under state law, with many more allowing medicinal use, none of which changes the federal picture.

The Arguments the Court Rejected

Hello Farms and the district court tried two workarounds. Neither survived.

First, they pointed to the longstanding congressional appropriations rider that blocks the Department of Justice from spending money to interfere with state medical marijuana programs. The Sixth Circuit wasn't buying it: the rider restricts prosecution funding, it doesn't legalize anything. The underlying conduct is still illegal.

Second, they pointed to the Department of Justice's April 2026 decision moving certain state-licensed medical marijuana products to Schedule III. The court said that change wasn't retroactive, and contract legality is judged at the time the deal was signed, in 2020. The judges added that even under the new rule, a similar transaction today would still need Drug Enforcement Administration registration this contract never had, so it wouldn't qualify anyway.

The Fair Complaint From the Industry Side

There's a real argument on the other side here. If a buyer can sign a supply contract, accept product, then walk away the moment prices drop and use federal illegality as a shield against the very state-legal business it agreed to, that's a gift to bad-faith counterparties. An unenforceable-contract regime means the biggest players can breach deals with smaller growers and pay nothing.

But that complaint is with Congress, not the Sixth Circuit. Contract illegality is a bedrock, centuries-old doctrine that predates marijuana entirely: courts don't enforce agreements to commit crimes. The Sixth Circuit didn't invent a marijuana-specific rule. It applied ordinary contract law to a business built on federal felonies. As the court itself acknowledged, the ruling likely delivers a significant financial benefit to Curaleaf's subsidiaries, who got roughly 2,000 pounds of product and now owe nothing for the rest.

The Bigger Legal Mess

This ruling lands amid a broader circuit split over how far state marijuana laws can go without running into federal constraints. A Congressional Research Service report cited by Legis1 documents these conflicts. The Second Circuit found in Variscite NY 4 v. N.Y. State Cannabis Control Board that New York's licensing program likely violates the Dormant Commerce Clause. The First Circuit reached a similar conclusion striking down Maine's residency requirement for dispensary officers in Northeast Patients Group v. United Cannabis Patients and Caregivers of Maine. The Ninth Circuit went the other way in Peridot Tree v. Washington State Liquor and Cannabis Control Board, holding the Dormant Commerce Clause doesn't apply to a market Congress has already criminalized.

The Supreme Court has not granted certiorari on that question, per Legis1. A majority of states have legalized some form of marijuana activity, yet all state recreational programs remain federal crimes under the Controlled Substances Act, according to the Legis1 report. Combined with the Sixth Circuit's contract ruling, cannabis businesses operating across state lines are stuck navigating a patchwork where the rules on licensing, contracts, and interstate commerce depend entirely on which federal circuit they're standing in. Adler's own prescription, laid out in his book "Marijuana Federalism: Uncle Sam and Mary Jane," is that Congress needs to actually decriminalize state-legal conduct rather than just declining to prosecute it. Until that happens, rulings like this one will keep landing, and the businesses building empires on state-legal weed will keep discovering their contracts are worth exactly nothing in federal court.