Up in Smoke: A $31.8 Million Marijuana Verdict Goes Down in Federal Appeals Court

A Michigan marijuana grower won a $31.8 million jury verdict for breach of contract… then watched it disappear on appeal. On September 10, 2026, the U.S. Court of Appeals for the 6th Circuit held that federal courts cannot enforce a contract to buy and sell marijuana because performing the deal required the parties to commit federal crimes (Hello Farms Licensing MI, LLC v. GR Vending MI, LLC, No. 25-1759 (6th Cir. Sept. 10, 2026)). So, if you’re a party to one of the tens of thousands of contracts in state-legal marijuana regimes, what does this mean for the validity of your contracts?

The Deal Gone Bad

In November 2020, Hello Farms signed an output contract to sell its entire 2020 and 2021 harvests to GR Vending and CURA MI, both subsidiaries of Curaleaf Holdings. GR Vending, which held Michigan medical and recreational licenses, paid a $2.2 million deposit and accepted an initial shipment of roughly 2,000 pounds. When marijuana prices went into freefall in early 2021, GR Vending refused to accept any more deliveries. Hello Farms sold the balance of its harvests to a third party at lower prices and sued for its lost profits. A jury sided with Hello Farms and awarded $31.8 million.

The district court enforced the contract, reasoning that it was a medical-marijuana deal and that the Rohrabacher-Farr Amendment (RFA) reflects a federal policy tolerating state medical-marijuana markets.

Just as a reminder, the RFA is an appropriations rider that was first passed in 2014. It bars the DOJ from using government funds to investigate and prosecute state-compliant medical marijuana operations. However, it does not on its face protect individuals who participate in adult-use marijuana operations, even if those operations are legal at the state level. Nor does it suspend the federal Controlled Substances Act. Remember, marijuana cultivation, sales, and use are still illegal under federal law, even in states with medical marijuana programs.

In practice, Rohrabacher-Farr allows state-compliant medical marijuana businesses to operate with much less fear that they will be prosecuted by the federal government.

The 6th Circuit Says: Not So Fast

The 6th Circuit disagreed and reversed. Writing for the panel, Judge John Nalbandian applied a long-settled rule: Federal courts will not lend their aid to enforce an agreement that requires the commission of a federal crime. Because marijuana is a controlled substance, and performing this contract required growing, possessing, and distributing it — each a felony under the Controlled Substances Act (CSA) — Hello Farms could not recover on the bargain.

The classification of the marijuana drove much of the analysis, because the RFA reaches only medical marijuana. The court held that the contract was not limited to the medical market; it required the product to pass recreational testing requirements, and GR Vending’s dual licensure let it move the product into the recreational market. That took the RFA out of the picture entirely. Notably, Judge Whitney Hermandorfer did not join this part of the opinion (Part II.A.1), so the panel was not unanimous on whether the contract reached recreational marijuana.

But that split did not matter to the outcome, because the court held that even if the contract were limited to medical marijuana, the result would be the same — and the full panel joined that alternative holding. The RFA, the court explained, does not legalize or decriminalize anything; it only temporarily bars the Department of Justice from spending appropriated funds to prosecute certain medical-marijuana offenses. The underlying conduct remains a federal crime.

Hello Farms also leaned on the April 2026 rule that rescheduled DEA-approved medications and state-licensed medical marijuana to Schedule III. The court rejected that as a safe harbor for two reasons. First, a contract that was illegal when it was made is not revived by a later change in the law; the April 2026 rule was not retroactive, so it had no bearing on a contract signed more than five years earlier. Second, the rescheduling would not, by itself, legalize the transaction; state-licensed medical marijuana moved to Schedule III still requires DEA registration (and FDA approval before entering interstate commerce), so the same deal today, without registration, would still violate federal law.

No Consolation Prize

The court also closed off a couple of creative workarounds. It rejected the idea that awarding lost-profit damages is different in kind from ordering illegal performance, explaining that a damages award measured by an illegal bargain is just as unenforceable as an order compelling the illegal conduct itself. And it declined to give any weight to the Supreme Court’s recent observations in United States v. Hemani about declining marijuana enforcement and shifting public attitudes, noting that enforcement trends and public acceptance do not change what Congress has written into the Controlled Substances Act.

The bottom line, in the court’s own words: Whether the contract is viewed as covering recreational or medical marijuana, “federal courts can’t enforce contract claims founded on an agreement to purchase marijuana illegally.”

Takeaways

For cannabis operators, this is a decision with real teeth. A few takeaways:

1. The federal courthouse doors remain effectively closed to marijuana contract disputes — at least in the 6th Circuit, which covers Michigan, Ohio, Kentucky, and Tennessee. A business that lands in federal court on diversity jurisdiction may find that a perfectly valid state-law contract is unenforceable.
2. Rescheduling did not change this outcome, and the opinion is a clear signal that operators should not assume the April 2026 rule cured the enforceability problem — not for existing contracts, and not for new ones absent DEA registration.
3. Even a purely medical-marijuana contract is at risk under this reasoning.
4. Forum and dispute-resolution planning matters more than ever: Operators should think carefully about state-court forum-selection clauses, arbitration provisions, and how their agreements are structured, rather than counting on a federal court to enforce them.

The panel was candid that the illegality defense can feel like a windfall for the breaching party — here, the defendants walked away from a $31.8 million verdict. But the court framed its role narrowly: enforcing federal policy set by Congress, not weighing the equities. Until Congress acts to legalize or decriminalize — something the court pointedly noted it has repeatedly declined to do — marijuana businesses in the 6th Circuit should treat federal-court enforcement of their contracts as unavailable. We’ll keep tracking how other circuits and the industry respond here on the Budding Trends Blog.

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