Debt, Taxes, and Limited Options: The Cannabis Industry Faces a Reckoning in 2026

After years of rapid expansion and record sales, the U.S. cannabis industry is approaching a critical financial juncture. The largest multi-state operators are carrying an estimated $6 billion in debt maturing in 2026, according to Beau Whitney, chief economist at Whitney Economics. For an industry already constrained by high interest rates, declining wholesale prices, and limited access to traditional capital markets, that amount of near-term debt poses a major challenge.

A Market of Growth and Instability

The story of cannabis over the past several years has been one of simultaneous growth and instability. Many operators expanded aggressively into new markets, often relying on expensive debt or sale-leaseback financing to fund cultivation, processing, and retail buildouts. As capital costs rose and margins thinned, the result has been a sector that, despite billions in sales, remains largely unprofitable.

In Michigan—the nation’s second-largest cannabis market, with over $3 billion in sales in 2023—that tension between demand and profitability is especially acute. Oversupply has driven prices to historic lows, competition is intense, and federal tax restrictions under Section 280E continue to erode profits. Even with record revenues, many companies are struggling to generate positive cash flow.

New Pressures in Michigan: A 24% Wholesale Tax

On top of these existing headwinds, Michigan operators now face a new financial hurdle. In October 2025, Governor Gretchen Whitmer signed a 24% wholesale cannabis tax into law as part of the state’s 2026 budget. Scheduled to take effect January 1, 2026, the tax will apply at the wholesale level, adding significant cost pressures for growers and processors that are already operating on thin margins.

For some, the new tax may simply be the final straw. Companies already burdened with high leverage and falling revenues may find themselves unable to meet debt obligations as 2026 approaches.

Bankruptcy Remains Off the Table

The looming debt maturities and new tax burden would, in most industries, prompt a wave of Chapter 11 filings. But for cannabis businesses, that option remains unavailable. Because cannabis remains illegal under federal law, operators are prohibited from accessing the federal bankruptcy system—regardless of state legalization.

Even if the federal government proceeds with rescheduling cannabis to Schedule III under the Controlled Substances Act, as proposed, that shift would not make cannabis companies eligible for bankruptcy protection. The result is that many cannabis operators—both multi-state enterprises and smaller Michigan-based companies—will be forced to look to state law remedies to restructure their obligations.

Receivership: Michigan’s State-Law Process

In Michigan, receivership has emerged as the primary mechanism for addressing financial distress in the cannabis sector. Receivership allows a court-appointed fiduciary to take control of a company’s assets and operations, stabilize its business, and manage restructuring or liquidation efforts for the benefit of creditors.

Recognizing the need for an alternative to federal bankruptcy, Michigan amended the Michigan Regulation and Taxation of Marihuana Act and the Medical Marihuana Facilities Licensing Act in 2020 to allow the state’s Cannabis Regulatory Agency (CRA) to authorize licensed cannabis operations under the control of a court-appointed receiver or trustee. This framework gives creditors and operators a structured path to manage distress while maintaining compliance with state regulations.

Receivership can serve multiple purposes: continuing operations under supervision, selling assets to licensed buyers, or winding down a business in an orderly way. For creditors, it provides oversight and accountability. For regulators, it ensures compliance and transparency. And for distressed operators, it offers a practical means of preserving value and avoiding the chaos of informal workouts.

Experience from Early Cases

Dragich Law has played a leading role in shaping how Michigan’s receivership process is applied in the cannabis industry. The firm has represented receivers in some of the most significant cases in the state, including the Skymint receivership—one of Michigan’s largest and most complex cannabis brands—as well as the Comco and PharmaCo, Inc. receiverships. These cases have helped establish a body of practice and precedent that will guide future restructurings in the sector.

Receivership in the cannabis industry presents unique challenges. Every sale of cannabis-related assets requires approval by the CRA, and only licensed entities may purchase or operate those assets. Even operational changes, such as product relocations or facility modifications, often require regulatory clearance. Navigating these layers of oversight demands both legal and cannabis industry-specific experience.

Preparing for a Difficult Year Ahead

As 2026 approaches, cannabis companies across the country—and especially in Michigan—face a confluence of pressures: rising taxes, maturing debt, and tightening liquidity.

Receivership is a viable tool for cannabis companies experiencing financial distress. It allows stakeholders to preserve value, maintain regulatory compliance, and work toward an equitable resolution in an industry that remains excluded from federal bankruptcy relief.

For investors, lenders, and operators alike, now is the time to evaluate exposure, explore restructuring options, and prepare for what could be a challenging year for the cannabis sector.