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Will United Cannabis be allowed to use Chapter 11 of the Bankruptcy code?

United Cannabis Corp. entered into chapter 11 several days ago in an effort to stop various patent infringement claims being lodged against it.  Most bankruptcy courts have said that use of the federal bankruptcy laws by companies in the cannabis space is a no go because even if the companies are in compliance with applicable state laws, they are operating in violation of federal law.  United Cannabis Corp. mostly deals in hemp based products, the production and sale of which do not violate the Controlled Substances Act.  Some, albeit a small amount of this company's revenues derive from non-hemp based cannabis so time will tell whether this fact eliminates the company's ability to reorganize under federal bankruptcy law. 

United Cannabis' bankruptcy case also delves into uncharted territory. Most bankruptcy courts have been hostile to cannabis businesses given their federally illegal status, but United Cannabis has said it is not concerned because it deals only in hemp and CBD, which are now legal under federal law.


cannabis, chapter 11, bankruptcy