#cannabisindustry – Contracts – “A recent decision from the United States District Court for the District of Colorado underscores the problem.2 There, the parties formed a cannabis business pursuant to Colorado state law, which permits the legal sale of cannabis for both medicinal and adult-use purposes. But, because the federal Controlled Substances Act still prohibits such sales as a matter of federal law, the court refused to enforce the parties’ contracts under Colorado state law. This has happened in other states as well, regardless of whether the parties’ contracts divided equity interests in their cannabis business (the Polk case) or sold a cannabis distribution business (the Left Coast case).3 As the Sensoria court noted, “the Court may not vindicate equity in or award profits from a business that grows, processes, and sells marijuana” and “[r]elief may not be in a form that endorses violating the [federal Controlled Substances Act].”4….
Importantly, however, there is a potential way out of this mess through a common commercial term—arbitration. For example, in Williams v. Eaze Solutions, Inc., the United States District Court for the Northern District of California rejected an illegality challenge to a contract asserted by a California resident who downloaded a cannabis mobile application created by Eaze Solutions.5 The District Court’s reasoning was elegant in its simplicity: the parties’ contract expressly provided for arbitration of the parties’ disputes and, under the Federal Arbitration Act (FAA) and binding Supreme Court precedent, any issues of illegality were to be determined by the arbitrators, not the federal courts.6″