Delinquent payments are causing a cascade of problems for small and large marijuana operators nationwide, according to a new report by Oregon-based cannabis data and research company Whitney Economics.

Preliminary results from the survey of operators and ancillary businesses revealed:

• 43% of respondents said delinquent accounts receivables are impacting operators’ ability to service debt.
• 32% of respondents believe delinquent accounts receivables are impacting operators’ ability to pay state or federal taxes.
• 59% of respondents reported that delinquent payments are having a greater impact on their business than Section 280E, the federal tax policy that prohibits marijuana operators from taking traditional business deductions because of the plant’s Schedule 1 status under the Controlled Substances Act.

Some respondents indicated accounts receivable delinquencies totaled more than two months of revenue, eclipsing millions of dollars in some cases.

Cannabis brands, distributors and manufacturers have been dealing with unpaid invoices for years, but the problems really ramped in mid-2022 as industry stocks tumbled and capital dried up, sources have told MJBizDaily.

The issue has led industry operators and lawmakers to seek potential solutions.

In May, MJBizDaily reported that a group of California distributors and brands representing more than half the state’s wholesale B2B cannabis market hired a credit association to rate retailers in the hopes of reducing hundreds of thousands of dollars in unpaid invoices – and reining in repeat offenders.

In California, the world’s largest regulated market, social equity licensees and brands, including Black- and Latino-owned businesses, have been particularly hit hard since most lack capital reserves and resources.

California Assembly Member Philip Ting earlier this year sponsored Assembly Bill 766, which proposed stiff penalties against operators skirting credit agreements.

However, the bill was not included among several major changes lawmakers approved to the state’s cannabis regulatory system.

In New York, regulators earlier this year proposed rules requiring operators to pay for purchases on credit within 90 days.

New York regulators are facing yet another lawsuit aimed at stopping them from issuing any additional adult-use marijuana licenses.

The lawsuit – filed in U.S. District Court in the Northern District of New York by two companies seeking retail licenses – comes less than a month after regulators approved settlement agreements in two previous suits that contributed to the tortuous rollout of legal adult-use cannabis sales in the state.

In the new lawsuit, Variscite New York Four and Variscite New York Five argue that the state’s retail marijuana licensing program violates the U.S. Constitution’s dormant commerce clause, which generally prohibits states from passing legislation that discriminates against or excessively burdens out-of-state citizens compared to in-state citizens.

Both companies are 51% owned by a Los Angeles man “who was convicted of a cannabis crime under California law rather than New York law,” the lawsuit claims.

The lawsuit targets the state Office of Cannabis Management and its Cannabis Control Board, according to Spectrum News 1.

The suit was filed the day that the latest licensing round closed, Green Market Report noted.

According to Green Market Report, the suit claims that state residency requirements are unconstitutional and that the two plaintiffs’ applications should have received “extra priority” because they had secured properties for their businesses.

“Because Plaintiffs satisfy every requirement for the ‘extra priority’ pool except the unconstitutional New York residency preferences, Defendants should process Plaintiffs’ applications in the extra priority pool,” according to the lawsuit.

Last November, a company with a name similar to the two plaintiffs in the new lawsuit – Michigan-based Variscite NY One – filed a suit seeking an injunction against the state after unsuccessfully applying for licenses in five New York regions.

That lawsuit prevented retailers from opening across significant portions of the state, Spectrum News 1 noted.

And similar litigation has been filed against other social equity programs elsewhere in the country, including in Los Angeles.