What Did the Sixth Circuit Decide in Hello Farms?

In September 2026, the U.S. Court of Appeals for the Sixth Circuit issued a decision with significant ramifications for the commercial contracts of American cannabis businesses, especially those operating in Michigan, Ohio, Kentucky, and Tennessee. In Hello Farms Licensing MI, LLC v. GR Vending MI, LLC, the Sixth Circuit reversed a $31.8 million jury verdict arising from the breach of a Michigan cannabis supply agreement, holding that federal courts cannot award contract damages when doing so would enforce an agreement to engage in conduct prohibited by the Controlled Substances Act (CSA).

The Sixth Circuit's Hello Farms Decision on Cannabis Contract Enforcement

The dispute arose from a 2020 output contract under which Hello Farms Licensing MI, LLC, a Michigan-licensed marijuana grower, agreed to supply its marijuana harvests to GR Vending MI, LLC. After GR Vending stopped accepting deliveries, Hello Farms sued for breach of contract. A jury ultimately awarded Hello Farms $31.8 million for GR Vending’s breach of contract.

How the Court Reached Its Decision

The Sixth Circuit reversed that verdict, reasoning that federal courts have a duty to decline enforcement of agreements when enforcement would enforce conduct prohibited by federal law. Because cannabis remains federally illegal under the Controlled Substances Act, federal courts may not enforce agreements regarding its production, possession, or distribution.

To determine whether enforcement was appropriate in this case, the Sixth Circuit first analyzed whether the contract at issue was a contract for medical or recreational cannabis. Although Hello Farms was licensed only as a medical grower when the agreement was executed, the majority determined that the contract was not limited to the medical market. Among other things, the agreement expressly required the product to satisfy recreational testing requirements, GR Vending possessed both medical and recreational licenses, and Michigan law permitted certain transfers between medical and recreational inventories.

The Sixth Circuit then considered the effects of the Rohrabacher-Farr Amendment (RFA), which prohibits federal government spending to prosecute certain state-level cannabis activity. The Sixth Circuit determined that, while the RFA limits prosecutions for such offenses, it does not make the underlying activity federally legal. The Sixth Circuit concluded that the RFA will not save such agreements.

Finally, the Sixth Circuit considered the effects of rescheduling efforts, particularly the April 2026 Final Order issued by the U.S. Department of Justice (DOJ) and the Drug Enforcement Administration (DEA), which rescheduled certain categories of marijuana to Schedule III under the CSA. The court explained that enforceability ordinarily turns on the law when the contract was made and that the 2026 rule did not operate retroactively. The court further observed that rescheduling would require registration with the DEA and compliance with certain other regulatory requirements, which the parties had not met.

Practical Takeaways for Cannabis Businesses

While the Hello Farms decision does not broadly invalidate cannabis companies’ commercial contracts, it presents significant obstacles for those seeking to enforce cannabis contracts in federal courts in Michigan, Ohio, Kentucky, and Tennessee. Outside those venues, it provides persuasive authority supporting the application of the illegality doctrine to invalidate cannabis contracts. Accordingly, plant-touching cannabis companies would be well advised to consider the enforceability of both their existing and new agreements.

Does the contract contain term to improve its enforceability?

The contract at issue in Hello Farms did not contain many terms to improve its enforceability. Companies should consider including alternative dispute resolution (ADR) provisions with state law choice-of-law provisions. This is especially true for contracts for plant-touching enterprises operating within the Sixth Circuit. This type of ADR provision empowers arbitrators to put state law ahead of federal Circuit Court precedent, and Hello Farms is silent as to the applicability of the Federal Arbitration Act.

If litigation is preferable to arbitration, companies can consider choice-of-law and forum-selection clauses requiring lawsuits to remain in state courts under state law, where a federal appellate decision like Hello Farms is not binding precedent.¹ Also, companies can consider the addition of clauses waiving the affirmative defense of illegality. While some courts have declined to enforce such provisions, such clauses can present an additional argument for enforceability.

Consider separating medical and recreational transactions.

The majority's analysis in Hello Farms focused on the fact that the underlying contract was not limited to medical marijuana and mentioned recreational marijuana. Where commercially feasible, separate agreements and clearly defined transaction scopes may help distinguish future disputes from Hello Farms.

Revisit existing agreements and procedures as the federal framework changes.

The Sixth Circuit emphasized the principle that a later change in law ordinarily does not validate a contract that was illegal when made. Businesses should therefore consider whether amendments, restatements, or novations may be appropriate as federal requirements change, rather than assuming existing agreements automatically benefit from subsequent regulatory developments such as rescheduling or DEA registration. Also, license holders can use this as an opportunity to reconsider their compliance practices and procurement SOPs, such as a legal review and a back-end process audit to monitor implementation.

Do not overlook non-contract remedies.

The decision addressed enforcement of the contract itself, but it does not necessarily resolve every potential claim arising from an unsuccessful cannabis transaction. Depending on the circumstances, equitable or tort theories may provide avenues for recovery when a contract is invalidated. Recent case law in the Sixth Circuit has left open questions surrounding restitution for unjust enrichment and permitted certain fraud claims to proceed notwithstanding illegality concerns.²

Navigating Cannabis Contract Enforcement After Hello Farms

For businesses with existing cannabis contracts, Hello Farms is a reminder to revisit those agreements and consider amendments where appropriate. For businesses entering into new cannabis contracts, Hello Farms is a useful guide to structuring their agreements. Ice Miller’s attorneys help cannabis businesses structure agreements that address evolving legal and regulatory challenges. If you have questions about how this ruling may affect your existing agreements or future transactions, contact our team.

^{[1] The Sixth Circuit allows parties to a contract to waive their right to remove actions to federal court. Cadle Co. v. Reiner, Reiner & Bendett, P.C., 307 Fed. Appx. 884, 886 (6th Cir. 2009) (“The statutory right of removal of a case from state to federal court under § 1441 is a right that can be waived, but such waiver must be ‘clear and unequivocal.’”) (citation omitted).
[2] 5 Guys Mgmt., Inc. v. Great Lakes Holistics Muskegon, Inc., 2026 WL 1911454, at *9 (W.D. Mich. July 2, 2026) (“The Supreme Court's precedents do not squarely address the issue of whether a plaintiff who is unable to seek damages for breach of an illegal contract may nevertheless seek restitution for unjust enrichment.”).}

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.