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Introduction
On December 18, 2025, President Donald Trump signed Executive Order 14370, directing the Attorney General to expedite the long-stalled rulemaking process to reschedule marijuana from Schedule I to Schedule III under the Controlled Substances Act. As of April 2026, the DEA process remains ongoing with no final rule issued, yet the order has renewed momentum toward recognizing marijuana’s accepted medical use and lower abuse potential.
The potential rescheduling to Schedule III could heighten product liability exposure for state-legal cannabis business entities by weakening federal illegality defenses, expanding market access, and raising expectations for product safety and accurate labeling. Drawing lessons from Canada’s post-2018 legalization experience, this article examines related U.S. lawsuits, highlights common claims in Canada, and outlines emerging risks and strategies for U.S. businesses.
Common Product Liability Claims in the U.S. Cannabis Sector
Product liability claims in the U.S. cannabis sector have grown steadily since state-level legalization began.
The most common allegations fall into four main categories: contamination (pesticides, mold, heavy metals, or microbial issues); inaccurate potency labeling (THC or CBD levels deviating significantly from packaging claims); failure to warn of health risks (e.g., cannabis-induced psychosis, cannabinoid hyperemesis syndrome, or overconsumption effects from edibles); and misrepresentation or false advertising (e.g., marketing products as “THC-free” when trace amounts remain detectable).
Notable precedents highlight these four main categories. Early litigation, including Flores v. LivWell, centered on allegations of unapproved pesticides on marijuana crops but was dismissed for failure to show a legally cognizable “injury in fact.” More recent lawsuits, however, focus on mislabeled, high-potency products. Several Delta-8 class actions filed in 2024 alleged unlawful Delta-9 THC levels that exceeded federal hemp limits. Other claims target Stiiizy, Inc. for allegedly marketing potent products to younger consumers and contributing to reported psychosis. The U.S. Supreme Court’s 2025 ruling in Medical Marijuana, Inc. v. Horn expanded RICO liability for economic harms tied to personal injuries, such as job loss from failed drug tests after consuming mislabeled CBD products.
Despite these developments, plaintiffs face substantial challenges, including federal illegality under Schedule I status, which strengthens defenses such as lack of standing or unenforceability of related transactions, as well as the difficulty of proving causation for personal injuries and the frequent denial of class certification due to individualized issues. Many cases therefore eventually settle quietly or focus on economic damages rather than widespread personal injury verdicts.
Canada’s Experience: Rising Claims After Nationwide Legalization in 2018
Canada’s experience following the nationwide legalization of recreational cannabis under the Cannabis Act in October 2018 offers a valuable preview for the U.S. market. While pre-legalization medical cannabis faced occasional recalls and limited disputes, the shift to a regulated recreational framework prompted a noticeable surge in product liability litigation, including several proposed and certified class actions. The most common claim categories align with those from the U.S. but are shaped by Health Canada’s stricter tolerances and oversight.
Manufacturing defects remain the most prevalent issue, particularly unauthorized pesticide contamination, such as myclobutanil and bifenazate found in recalled batches. These concerns ultimately gave rise to Downton v. Organigram Holdings, Inc., the first certified cannabis product liability class action in Canada. On appeal, the Nova Scotia Court of Appeal substantially narrowed common issues to focus on consumer-specific claims, including breach of contract and regulatory violations, but overturned certification for personal injury and adverse health effects claims.
Potency misrepresentation is another frequent allegation. Plaintiffs often claim that THC and CBD levels deviate significantly from labeled amounts and, in many cases, exceed the allowed variance of 15%. Failure to warn claims have also emerged in relation to health risks, including cannabinoid hyperemesis syndrome (CHS). Proposed actions have targeted major producers such as Aurora Cannabis for allegedly inadequate risk disclosures.
Overall, since nationwide legalization, litigation in Canada has increased from sporadic disputes to a more sustained wave of proposed class actions, even though plaintiffs continue to face evidentiary hurdles. These trends offer useful parallels for U.S. businesses as federal policy evolves toward greater legitimacy without full regulatory alignment.
How Rescheduling to Schedule III Could Change the Game
If marijuana is rescheduled from Schedule I to Schedule III, the shift would not legalize recreational use federally or impose comprehensive FDA oversight on non-prescription cannabis products. However, it would carry meaningful implications for product liability exposure.
By recognizing accepted medical use and lower abuse potential, rescheduling would weaken long-standing federal illegality defenses that have deterred or complicated many claims. Meanwhile, expanded access to banking, capital, and distribution could scale operations nationally, increasing the consumer base and magnifying the impact of defects, inaccurate labeling, or contamination. As expectations for quality control rise, even minor compliance lapses could become grounds for negligence, strict liability, or consumer protection claims, as illustrated by Canada’s post-2018 experience, where legalization has coincided with increased litigation.
For U.S. cannabis businesses, the message is clear: risks are evolving from state-specific issues to broader, multi-state exposure. The best defense remains proactive: implement rigorous third-party testing, ensure transparent labeling, secure product liability insurance, conduct regular compliance audits, and monitor recall trends and emerging health-related claims. As federal policy continues to shift, those that prioritize risk management will be better positioned to limit exposure and defend against new claims.
