The Empire State of Cannabis

Marijuana decriminalization is in, adult-use is out, a regulated hemp-derived CBD marketplace is in limbo, and NYC begins CBD-ban.

 For New York’s cannabis industry, 2019 began with a bang and ended with a whimper. In January, Governor Cuomo announced that legalizing marijuana and creating a regulated adult-use marketplace was a top legislative priority. Indeed, Governor Cuomo included an omnibus marijuana bill as part of his proposed budget. Known as the “Cannabis Regulation and Taxation Act,” the bill would have legalized recreational marijuana, overhauled the state’s medical marijuana system and created new hemp regulations. Since the senate and assembly were both in democratic control, “green fever” swept across the state.

The anticipation quickly waned. Democrat leaders argued that Governor Cuomo’s proposal lacked sufficient social justice components and failed to help those communities most affected by the war on drugs. As the April deadline neared for the budget’s passage, it became increasingly clear that the Cannabis Regulation and Taxation Act would not make the final cut.

After the budget left recreational cannabis in the dust, new excitement mounted as negotiations continued in the Legislature to pass a stand-alone bill, the revitalized “Marijuana Regulation and Taxation Act,” before the 2019 legislative session ended in mid-June.

Ultimately, the bill failed in a rollercoaster final week and once the smoke cleared, the Legislature passed a compromise marijuana decriminalization bill and a bill to regulate hemp extracts such as cannabidiol (CBD). While Governor Cuomo is expected to sign the decriminalization bill into law, he recently stated he is not yet sure if he will sign the new hemp legislation.

S 6579A – New York’s Marijuana Decriminalization Legislation

Once signed into law, Senate Bill 6579A will decriminalize marijuana and automatically expunge low-level marijuana offenses. Under the new bill, possession of up to one ounce of marijuana will exact a $50 fine and will be considered a violation. Possession of one to two ounces of marijuana – currently a class B misdemeanor – would become a violation subject to a fine of up to $200 and no longer punishable by jail time.

To help address the racial disparities in the number of of marijuana arrests in New York, S 6579A automatically expunges the records of those who were convicted for minor marijuana offenses. The bill explicitly states the expunged low-level marijuana convictions cannot “operate as a disqualification of a person to pursue or engage in any lawful activity, occupation, profession or calling.”

 S 6184A – Industrial Hemp and Hemp Extracts Regulations

Tucked away behind the chaos of the closing days of New York’s legislative session was an overlooked but critically important bill passed by both houses in the Legislature.  The bill will regulate New York’s hemp program and hemp extracts, such as CBD. In addition, Senate Bill 6184A amends the Agricultural and Markets law and the existing hemp program, creating new licensing requirements and setting forth a regulatory framework for consumable CBD products. As noted, Governor Cuomo is unsure whether he will sign the bill into law, recently commenting that he needs more time for review.

The legislation would change the definition of “industrial hemp” to include “all derivatives, extracts, and cannabinoids” of industrial hemp. It will require that hemp used for extracts be sourced from authorized New York state industrial hemp producers.

The most significant change under S 6184A would be creating a new regulatory scheme for hemp extracts. The bill would create three new license categories for cannabinoid-related hemp extracts: (1) a cannabinoid grower license, (2) a cannabinoid manufacturer license and (3) a cannabinoid extractor license. The Department of Agriculture and Markets also would have the authority to issue permits to retailers, wholesalers and distributors to sell hemp extract products.

Addressing the dearth of formal standards in the industry, the bill puts consumer protection at the forefront, authorizing the Department of Agriculture and Markets to promulgate rules and regulations governing the packaging and labeling of hemp-extract products sold in New York state. At minimum, the regulations prohibit labels from stating hemp extracts can treat, cure or prevent disease, without prior approval from the federal government. The rules and regulations also would require a supplement fact panel as well as QR codes with testing data, cannabinoid per-serving data and number of servings per container. Also, hemp extract products must be manufactured in accordance with federal goods manufacturing processes.

In an attempt to protect New York growers, the bill would require all hemp extracts sold in the state to be from New York−licensed manufacturers. Out-of-state products would not be permitted to be sold in New York unless they meet all of New York’s requirements.

While this bill is not yet law, New York is following the path of states such as Texas and Florida, which recently passed legislation regulating hemp extracts intended for human consumption. Existing manufacturers must take notice of the quickly evolving regulatory landscape and prepare for ramped-up regulation of CBD-infused products at the state level.

 The New York City Ban on CBD in Food and Drink went into effect July 1, 2019

The New York City Department of Health and Mental Hygiene (NYCDOH) will begin enforcing a ban it announced earlier this year on CBD in foods and drinks.  The NYCDOH will start embargoing products in stores that violate the ban and the products will have to be returned to the supplier or discarded. Starting October 1, 2019, the NYCDOH will begin issuing violations to food service establishments and retailers for offering food or drink containing CBD.  Violations may be subject to finds, and for food service establishments, violation points may count toward the establishment’s letter grade.

The ban also applies to packaged goods. In a July 1 tweet, the NYCDOH stated the “NYC Health Code prohibits adding CBD to food or drink, including in packaged food products.”