2025 Cannabis Litigation Retrospective

2025 had no shortage of litigation impacting both cannabis and hemp businesses. Looking back at the past year: the hemp industry drew regulatory and legislative actions to limit or control hemp products across the nation; the plaintiffs’ bar continued to target cannabis businesses; courts grappled with the illegality doctrine; and lawsuits continue to test inconsistencies between state and federal law. We are excited to see how these trends develop across this year.

Efforts to Limit and / or Regulate Hemp Spawn Lawsuits

2025 saw developments in lawsuits challenging efforts to limit or regulate hemp at the state level, especially in California, Missouri, New Jersey, and Virginia.

For example, in late 2024, The U.S. Hemp Roundtable, Inc. and individual manufacturers challenged the California Department of Public Health’s emergency regulation restricting the amount of hemp in a product, as well as serving and packaging sizes, and restricting sales of hemp products to individuals over the age of 21. That litigation currently remains dismissed.

Virginia and Missouri took more decisive steps to halt the sale of intoxicating hemp products altogether, and both states saw litigation to stall enforcement of their respective laws. Both suits were voluntarily dismissed by plaintiffs in 2025.

2026 promises to be another year of new laws and lawsuits, as states and local governments continue to wrestle with the emerging market for hemp. In late January, the Chicago City Council voted to ban the sale of many intoxicating hemp products. As this proposal drew vociferous opposition from business owners, the ban could quickly end up challenged in court.

Furthermore, the One Big Beautiful Bill Act tightens the hemp definition to a total THC standard and effectively bans several intoxicating and synthetic cannabinoid products, with those changes set to take effect on November 12, 2026.

Cannabis Businesses Sued by Individuals & Class Actions

Dispensaries faced more wage and hour lawsuits. Recent cases claim that operators violated the Fair Labor Standards Act, diverted tips to managers who rarely performed tip producing work, redistributed tip jar funds disproportionately through payroll, or even used tip money for charitable donations without transparency (Beck v. Curaleaf Inc., 1:25-cv-00741 (D. Md. 2025); Ochoa v. Aguilar, 2:24-cv-00597 (D. N.M. 2025); Fowler v. Medicine Man Technologies, Inc., 1:23-cv-00640 (D. N.M. 2024)). These suits have resulted in costly litigation and settlements. Operators remain subject to federal and state employment statutes, and should review their policies, exclude managers and supervisors from tip pools, and implement clear tip handling procedures to avoid such litigation.

Like employees, consumers have brought suits seeking large class action damages. Many Illinois cannabis businesses were hit with class action lawsuits alleging that certain oil products were mislabeled under Illinois law (MOHEBBI v. Curative Health Cultivations, 25 cv 360, (N.D. Ill. 2025)). Mislabeling can create large liability risks. This past year, the Supreme Court approved a plaintiff to pursue damages under the Racketeer Influenced and Corrupt Organizations Act (RICO) for the loss of his job due to a positive drug test after he took a purportedly THC-free product (Medical Marijuana, Inc. v. Horn, 604 U. S. 593 (2025)). Even in an industry where labelling is closely controlled by state regulations, businesses are not free from litigation risk.

Persistent Illegality Doctrine Challenges

2025 saw continued developments in a line of cases spanning back to the origins of state-regulated cannabis. State and federal courts recognize the illegality doctrine, which bars the enforcement of illegal contracts. As cannabis remained proscribed by the Controlled Substances Act (CSA) and other laws, courts are not always available to cannabis businesses seeking to enforce their contracts (CCH Acquisitions v. J&J&D Holdings, Civil Action 2:23-cv-2983 (S.D. OH. 2025) for dismissing breach of contract action arising from sale of cannabis business). Cannabis businesses must thus continue to weigh the risks of filing actions in courts and should consider alternative dispute resolution and arbitration clauses as they enter contracts.

State vs. Federal Law

2025 saw another blow to the efforts to remove intrastate cannabis commerce from the purview of federal law and the CSA (Canna Provisions, Inc. v. Bondi, No. 24-1628 (1st Cir. 2025)). President Trump signed an executive order in December 2025 that is likely to change the form of challenges to the reach of federal supremacy. If and when cannabis is moved the Schedule III of the CSA, it will likely reduce motivation to challenge the CSA’s reach, at least for medical cannabis. However, that rescheduling will also push state-regulated cannabis into conflict with federal drug and food laws and regulations. Out of the frying pan, into the fire.

https://www.jdsupra.com/legalnews/2025-cannabis-litigation-retrospective-1848015/