Earlier this year, we addressed some emerging trends to watch in the cannabis industry in 2022. One of those trends was an increase in litigation — a natural consequence of a growing industry (in this case, one facing some unique challenges). With half the year behind us, we take a deeper dive into the kinds of cases we have been seeing. Specifically, we look at litigation trends to determine the kinds of cases we are likely to see more of as the industry matures.
To better understand the landscape faced by potential litigants, we conducted an analysis of cannabis-related litigations filed within the first half of 2022, specifically focusing on civil litigations commenced in the 19 states — including the District of Columbia — that have enacted laws fully legalizing adult recreational cannabis.
We looked at state and federal dockets, as well as other public filings and news coverage, to compile a data set of litigations commenced between Jan. 1, 2022, and June 30, 2022, impacting the industry in some way. We then looked at filings in those cases to filter out false hits, which narrowed our data set to 55 representative cases.
By far, the most common category of dispute appearing in our analysis is what we classified as commercial disputes, which include actions for breach of contract, landlord-tenant disputes, securities issues, as well as other business torts, such as breach of fiduciary duty and fraud. Roughly 34% of the litigations in our data set were identified as commercial disputes. This should come as no surprise given the industry’s sustained expansion over the years, driven largely by continued growth in mature markets, such as California, and further bolstered by the prospect of new and emerging markets in those states that have recently legalized recreational cannabis or are likely to do so in the near future.
By most estimates, the industry’s impressive growth is not expected to slow any time soon, which will only encourage more businesses and investors to try to get a foothold in the cannabis space. Some of those deals are bound to go south since valuations often remain speculative, and a gold rush mentality prevails in new markets. As a result, we expect commercial disputes to remain prevalent in the years ahead.
To Read The Rest Of This Article By Alex Malyshev and Sarah Ganley on Reuters
Published: July 14, 2022
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