The industry can't wait: Cannabist bankruptcy, PharmaCann's Colorado exit, and the cost of four months without rescheduling

While the Department of Justice sits on a December executive order directing cannabis rescheduling, the cannabis industry itself is running out of runway.

In the last four weeks, two of the largest multistate operators in the United States have taken material distress actions:

• The Cannabist Co. filed for Chapter 11 bankruptcy protection in Delaware on March 25, 2026, with roughly $270 million in unpaid debt to lenders and the IRS.
• PharmaCann announced the closure of one of Colorado's largest licensed cultivation facilities, laying off 132 workers by May 20.

Both companies are responding to the same underlying economics: wholesale cannabis prices have collapsed across legal markets, Section 280E tax treatment continues to choke cash flow, and the capital markets remain largely closed to federally illegal businesses.

Schedule III rescheduling would address two of those three pressures. Schedule III is not moving.

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Cannabist: the fall of a national operator

The Cannabist Co. — formerly known as Columbia Care — was once one of the most expansive multistate operators in the industry, with operations in more than a dozen states and aggressive expansion funded by debt raises during the 2020–2021 bubble.

The March 25 Chapter 11 filing came after a multi-year wind-down. The company has been selling off state licenses to meet creditor obligations:

• Virginia — license sold to satisfy creditors
• Ohio — license sold
• Delaware — license sold
• Other states — negotiations ongoing

Even after these sales, the company reports approximately $270 million in debt owed to lenders and the Internal Revenue Service. The IRS exposure is particularly telling: Section 280E disallows most business expense deductions for cannabis operators, which typically produces large federal tax liabilities that companies then defer as they struggle to generate positive cash flow.

The Cannabist case is not the first MSO bankruptcy, but it is one of the largest. The filing marks the clearest signal yet that the 2020–2021 generation of aggressive MSO expansion has run its course, and that the cost structure of federally illegal cannabis operation is no longer survivable for companies carrying significant debt.

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PharmaCann: Colorado becomes uneconomic

On April 9, Chicago-based PharmaCann notified Colorado regulators it would close one of its largest licensed cultivation operations, laying off 132 workers by May 20.

The company's stated rationale is direct: with wholesale prices at current levels, it has become cheaper to purchase cannabis on the open market than to grow it in-house.

Colorado's wholesale cannabis market has been under pressure for years. Legal adult-use launched in 2014 made the state an early beneficiary of first-mover advantage, but oversupply, consolidation, and the migration of demand to newer legal markets have eroded margins. Wholesale flower prices that peaked above $2,000 per pound in the mid-2010s have at points traded below $600 per pound in 2025–2026.

PharmaCann is not exiting Colorado retail — the company retains dispensary operations. It is exiting cultivation, the most capital-intensive and margin-compressed segment of the business. The decision is economically rational. It is also a leading indicator for the rest of the cultivation sector.

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The REIT angle

The distress in cannabis operations has been reflected in the REITs that lease facilities to those operators.

Innovative Industrial Properties (IIPR) — the largest cannabis-focused REIT in the United States — has spent the past year working through tenant defaults, property repossessions, and negotiated settlements. In its most recent reporting, IIPR indicated it had recovered approximately $3 million in unpaid rents through early 2026, signaling improvement but also the scale of prior exposure.

REIT tenant issues are a barometer. When a large MSO can't make its cultivation facility rent, the REIT writes down receivables, the operator loses the facility, and capacity exits the market. That capacity exit is, paradoxically, what eventually stabilizes wholesale prices — but only after a painful period of restructuring.

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The earnings split

Not every operator is distressed. The industry's performance is increasingly bifurcated:

• Tilray Brands reported record Q3 fiscal 2026 results, with net revenue increasing to $207 million. Tilray's business is diversified across cannabis, beverage alcohol, and wellness, and the company has used its non-cannabis segments as a cash flow buffer.
• Vireo Growth announced a California retail joint venture with Glass House Brands on April 13, a structural move that pools retail economics across California's difficult market.
• Cresco, Green Thumb, and Verano — the three largest U.S.-focused MSOs — have each remained profitable on an adjusted EBITDA basis, though their stock prices reflect the sector's broader malaise.

The pattern is clear: companies with diversified revenue, strong balance sheets, and disciplined capital allocation are surviving. Companies that levered up during the 2020–2021 expansion phase — with insufficient revenue to service that debt under 280E tax treatment — are increasingly finding themselves in bankruptcy, asset sales, or mass layoffs.

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What rescheduling would do

Schedule III rescheduling — if and when the DEA actually finalizes the rule — would address the industry's most acute financial pressure: Section 280E.

Section 280E of the Internal Revenue Code prevents any business trafficking in Schedule I or Schedule II substances from deducting ordinary business expenses. For cannabis operators, this typically produces effective tax rates of 60–80% of taxable income, versus the 21% federal corporate rate that would apply to a non-cannabis business with equivalent economics.

Industry estimates suggest that 280E relief alone would unlock billions of dollars in industry cash flow annually. For a distressed operator like The Cannabist Co., 280E relief would not undo $270 million in existing debt — but it would have materially changed the trajectory over the prior three years.

Schedule III would also:

• Reduce research barriers for cannabis clinical trials
• Signal federal acknowledgment of medical cannabis legitimacy
• Modestly improve capital access, though full banking reform would still require separate legislation

Schedule III would not:

• Legalize interstate commerce
• Provide immediate banking reform
• Help operators who have already filed bankruptcy or closed facilities

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The four-month cost

The Cannabist bankruptcy filing on March 25 came three months and one week after Trump's December 18 rescheduling executive order. PharmaCann's Colorado layoff notice came three months and three weeks after that order.

Neither company's distress was caused solely by DOJ inaction on rescheduling. The cost structure issues and wholesale price compression have been building for years. But in each case, a timely Schedule III rescheduling — eliminating 280E — would have changed the underlying economics enough to potentially alter outcomes.

Four months of inaction is measurable in bankruptcy filings, layoff notices, and closed cultivation facilities.

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The bottom line

Cannabis industry distress is not hypothetical. It is showing up in Delaware bankruptcy court filings and Colorado Department of Labor WARN notices. Large operators are running out of time. The regulatory relief that would most directly address their core economic problem is sitting on the Attorney General's desk.

Saturday's psychedelics executive order demonstrated that this administration is capable of shipping drug policy action with funding, operational announcements, and coordinated agency execution. The cannabis industry has watched the same administration fail to execute on a December order that required, fundamentally, one personnel decision and one procedural resumption.

The industry cannot wait forever. Some of it has already stopped waiting.