As California’s cannabis industry matures, the past year has produced an array of court decisions and case law addressing regulatory compliance, property rights, insurance coverage, and the persistent tension between state legalization and federal prohibition.
DCC’s Track-and-Trace System Fell Short in California Superior Court
Arguably, the most significant decision this year came from Orange County Superior Court on December 9, 2025, when Judge Lee Gabriel ruled that the Department of Cannabis Control has failed to automatically flag irregularities in the state’s track-and-trace system as required by law. In HNHPC, Inc. v. Department of Cannabis Control, Judge Gabriel found that the DCC’s database “fails to comply” with MAUCRSA’s mandatory duties. [1] This case addresses long-standing allegations that the DCC allowed intermediary companies with “burner distribution licenses” to legally purchase cannabis and then illegally divert it out of state.
The DCC argued that manual report generation satisfied its oversight obligations, but Judge Gabriel rejected this position, holding that the statute requires automatic flagging of suspicious activity. A hearing is scheduled for February 6, 2026, to determine compliance measures. [1] The case has a complex procedural history. The trial court initially dismissed it in March 2023, but the Fourth Appellate District reversed in August 2023, finding that plaintiff HNHPC adequately stated claims for injunctive relief. Following remand and a mandamus trial in October 2025, the December ruling represents a major vindication for plaintiff Catalyst Cannabis Company. [2] [3]
Federal Cannabis Jurisprudence: U.S. Supreme Court Expanded RICO Liability
On April 2, 2025, the U.S. Supreme Court held in Medical Marijuana, Inc. v. Horn that a plaintiff may seek treble damages under RICO for business losses resulting from personal injury. The case arose when a truck driver purchased a CBD tincture labeled THC-free, tested positive for THC, and lost his job. The 5-4 decision, written by Justice Barrett, substantially expands liability exposure for cannabis and hemp companies selling mislabeled or contaminated products. [4] [5]
In State Court: a Property Rights Precedent That Vanished, and Delivery Drivers Faced Insurance Policy Exclusions
California’s tension between state legalization and federal prohibition came into sharp focus in JCCrandall, LLC v. County of Santa Barbara. In January 2025, the appellate court held that property owners could refuse cannabis transportation across easements on federal illegality grounds. However, the California Supreme Court de-published the decision on March 19, 2025, meaning it has no precedential value for future cases but still governs the specific parties. This extraordinary intervention protected state cannabis law from federal Supremacy Clause challenges while signaling ongoing conflict between state and federal jurisdiction. [6] [7] [8] [9] [10] [11]
The Fourth District Court of Appeal addressed cannabis insurance issues in Murphy v. AAA Auto Insurance of Southern California, decided January 24, 2025. The court held that a “compensated carrying exclusion” in a personal auto policy barred coverage for an employee cannabis delivery driver using his personal vehicle, regardless of employment status. The decision signals that cannabis employees cannot rely on standard personal auto insurance for work-related vehicle use. [8] [12] [13]
Federal Constitutional Challenge to Local Cannabis Enforcement
The Ninth Circuit Court of Appeals revived constitutional challenges to Humboldt County’s cannabis penalties in Thomas v. County of Humboldt, decided December 30, 2024. The court found that plaintiffs plausibly alleged Excessive Fines Clause and substantive due process violations where the county imposed cannabis penalties on current property owners for previous owners’ violations. The U.S. Supreme Court denied certiorari on October 14, 2025, allowing the Ninth Circuit decision to stand. [14] [15] [16]
Federal Challenge to California’s Labor Peace Agreement Requirement
The Southern District of California dismissed Ctrl Alt Destroy, Inc. v. Elliott in March 2025, a challenge to California’s Labor Peace Agreement requirement, on “unclean hands” grounds because the plaintiff’s cannabis business violates federal law. But the case is on appeal to the Ninth Circuit, where the National Right to Work Foundation has argued the LPA mandate is preempted by federal labor law. [17] [18]
Takeaways from California Cannabis Litigation and Case Law in 2025
California cannabis litigation cases, and the court decisions in these cases, over the past year reveal courts increasingly holding cannabis businesses to conventional legal standards for torts, contracts, and property, all while denying these businesses certain federal protections due to federal cannabis prohibition. In response to what courts – from California state trial courts all the way up to the U.S. Supreme Court – had to say about cannabis law in 2025, California cannabis businesses should prioritize regulatory compliance due diligence, comprehensive insurance analysis, clear federal-illegality contractual provisions, and proactive measures to protect against expanded RICO liability.