Scarinci Hollenbeck, LLC, LLCScarinci Hollenbeck, LLC, LLC

Firm Insights

Marijuana Businesses In Colorado Unable To File For Bankruptcy

Author: Joel R. Glucksman

Date: January 20, 2015

Key Contacts

Back

Marijuana businesses aren’t allowed to go up in smoke, even when they aren’t making any money in Colorado. So what are they going to do?

The burgeoning marijuana industry in Colorado has run into yet another legal snafu, as inconsistencies between state and federal laws are preventing businesses and owners from filing for protection under the bankruptcy law.

Industrial Hemp Farming Poised for Growth Under New NJ Hemp Law
Photo courtesy of Rick Proctor (Unsplash.com)

Attorneys for Sarah and Frank Arenas of Denver filed a 43-page appeal stating that a judge dismissed their August bankruptcy petition in error because their assets were derived primarily from the medical marijuana industry, The Denver Post reported. By refusing to protect such assets in bankruptcy in the same way that other assets are, the appeal argues, the federal government is passively prosecuting crimes that it earlier said it would not.

The Obama administration said in late August that it would not challenge state laws legalizing marijuana as long as strict regulations on the sale and distribution of the drug are enforced, according to The Washington Post.

“The [Arenases] should not be faulted, or more importantly lose the right to a discharge of their debts, for playing by rules created by the same agency that seeks to dismiss their bankruptcy case for breaking those rules,” attorney Daniel Garfield wrote, as cited by The Denver Post. “The federal government has deliberately and actively allowed a legal marijuana industry to flourish in Colorado and not to prosecute participants in that industry. The federal government has made a conscious decision to allow [the Arenases’] otherwise illegal business to operate.”

The U.S. Bankruptcy Appellate Panel of the 10th Circuit Court will decide whether to overturn or uphold the lower court’s ruling.

Either decision is likely to be used as an important precedent going forward. Should the ruling be upheld, it will create more uncertainty in the already somewhat shaky business climate that exists in the Colorado marijuana industry. If the ruling is overturned, businesses in this sector may take it as a sign that the federal government is ready to recognize their legitimacy, perhaps motivating them to fight for other, similar, business rights.

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Scarinci Hollenbeck, LLC, LLC

Related Posts

See all
The Due Diligence Process for NY Condominiums and Cooperatives post image

The Due Diligence Process for NY Condominiums and Cooperatives

While the New York City real estate market can be extremely competitive, moving too quickly often backfires. Before purchasing a condominium or cooperative in New York City, it is important to do you homework. Purchasing property in NYC can involve a dizzying number of legal issues. These include condo and co-op rules, rent restrictions, and […]

Author: Jesse M. Dimitro

Link to post with title - "The Due Diligence Process for NY Condominiums and Cooperatives"
Smart Contract Legal Issues: Drafting Agreements for Blockchain post image

Smart Contract Legal Issues: Drafting Agreements for Blockchain

Smart contracts feature a unique blend of legal agreement and technical code. This innovation has the potential to reshape how business is conducted. At the same time, smart contract legal issues around enforceability, jurisdiction, identity, and compliance are common. The legal framework for these self-executing agreements is still evolving. What Are Smart Contracts? Smart contracts, […]

Author: Bryce S. Robins

Link to post with title - "Smart Contract Legal Issues: Drafting Agreements for Blockchain"
Are Stay Interviews the Key to Retaining Top Talent? post image

Are Stay Interviews the Key to Retaining Top Talent?

Retaining top talent continues to be one of the greatest challenges facing employers today. Even in an employer’s market, the loss of a key employee can disrupt operations and result in significant costs. While compensation plays a role, long-term retention often depends on workplace culture, communication, and employee engagement. One increasingly popular strategy for improving […]

Author: Angela A. Turiano

Link to post with title - "Are Stay Interviews the Key to Retaining Top Talent?"
Why Secured Transactions Are Important post image

Why Secured Transactions Are Important

Secured transactions form the backbone of a wide range of business dealings, including business loans, mortgages, and inventory financing. Because the stakes are often high and relatively minor oversights can have drastic consequences, lenders and borrowers should thoroughly understand how to form an enforceable security agreement that protects their legal rights. What Is a Secured […]

Author: Dan Brecher

Link to post with title - "Why Secured Transactions Are Important"
Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications post image

Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications

Cashing a check marked “paid in full” can be a risky endeavor, particularly if you don’t fully understanding the legal implications. If you are owed more than the amount of the check you accept and deposit, you may waive your right to collect the full disputed amount. That is why you should consider either rejecting […]

Author: Dan Brecher

Link to post with title - "Don’t Cash a “Paid in Full” Check Without Understanding the Legal Implications"
Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors post image

Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors

The One Big Beautiful Bill Act of 2025 (OBBBA) significantly impacts federal taxes, credits, and deductions. A key change relating to Qualified Small Business Stock (QSBS) allows greater tax-free gains for investments in startups and other qualifying small businesses. Company founders and other investors should understand how the enhanced tax strategy works or risk missing […]

Author: Dan Brecher

Link to post with title - "Changes to Qualified Small Business Stock Will Benefit Startup Founders and Investors"

No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.

Sign up to get the latest from our attorneys!

Explore What Matters Most to You.

Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.

Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.

Let`s get in touch!

* The use of the Internet or this form for communication with the firm or any individual member of the firm does not establish an attorney-client relationship. Confidential or time-sensitive information should not be sent through this form. By providing a telephone number and submitting this form you are consenting to be contacted by SMS text message. Message & data rates may apply. Message frequency may vary. You can reply STOP to opt-out of further messaging.

Sign up to get the latest from the Scarinci Hollenbeck, LLC attorneys!