LEGISLATIVE UPDATE

In the last issue of Cannabuff, we discussed the landmark passage of the Marihuana Regulation and Taxation Act (“MRTA”). Since then, while there has been much excitement, there has not been much action to implement MRTA. The state legislative session is set for summer recess, and as of the time of this writing, there have been no appointments to the Cannabis Control Board (“CCB”), no nomination of an executive director for the Office of Cannabis Management (“OCM”), and no appointments to the state cannabis advisory board— all called-for by MRTA. Until the implementation of MRTA, the New York State Department of Health (“DOH”) remains charged with regulating cannabinoid hemp. And DOH has been moving forward with its regulatory program. On May 19, 2021, DOH issued updated proposed regulations and standards for the production, distribution, and sale of cannabinoid hemp products in New York. Even though the proposed regulations will become effective after a public comment period ending in July, key provisions affecting packaging, labeling, and laboratory testing will not become effective until November 1, 2021. So licensed hemp retailers can continue to sell most hemp retail products as-is for now.

Smokable vs. Inhalable

One of the most significant changes in the DOH regulations is that retailers will no longer be able to sell any cannabinoid hemp products “clearly labeled or advertised for the purpose of smoking.” This includes cigarettes, cigars, pre-rolled, or packaged or combined with other products designed to facilitate smoking (such as rolling papers or pipes). Fear not—smokable hemp is not gone for good. MRTA provides for the sale of smokable hemp products by adult-use cannabis retail licensees. While smokable hemp products will not be allowed under the DOH program, “inhalable” hemp products are still permitted. All “inhalable” cannabinoid hemp products must be closed systems with pre-filled disposable cartridges—either attached to a rechargeable battery, or a single-use product that cannot be recharged (a fancy way of referring primarily to vapes and e-cigarettes). DOH’s regulations have also shown concern about the contents of inhalables. All non-hemp ingredients in inhalable products must be pharmaceutical grade, and cannot contain ingredients such as synthetic terpenes; polyethylene glycol (PEG); vitamin E acetate; medium-chain triglycerides (MCT oil); or medicinal compounds and illegal or controlled substances. In another move that may disappoint some, inhalable cannabinoid hemp products cannot contain any flavors or flavoring agents—except for hemp-derived terpenes. So say goodbye to that tutti-frutti-flavored pen! Food, Alcohol, and Tobacco

Under the updated regulations, DOH contemplates that cannabinoid hemp products will be largely stand-alone. Hemp products can be added to food and drink, but all must be pre-packaged. Cannabinoid hemp products cannot be added to food or any other consumable products at the point of sale. Moreover, the DOH regulations prohibit mixing cannabinoid hemp products with other ‘vices.’ Cannabinoid hemp products cannot contain liquor, wine, beer, cider, or meet the definition of an “alcoholic beverage” under the Alcohol Beverage Control Law. They also cannot contain any tobacco or nicotine.

Retail Sales

A license from DOH is required to sell cannabinoid hemp products in New York. The licensing fee costs $300 per retail location. Retailers must display any cannabinoid hemp products in a way that distinguishes them from non-cannabinoid hemp products to “aid consumers in locating cannabinoid hemp and avoid accidental purchase or consumption.” Retailers must also have safeguards in place to verify that someone purchasing an inhalable product or flower product is 21 years of age or older. The regulations appear to contemplate offering cannabinoid hemp products in convenience stores and other establishments, albeit in a separate section of the store. Contrast this with the MRTA, which prohibits the sale of alcohol at any adult-use dispensary. It remains to be seen whether and how retailers will abandon their alcohol offerings in favor of selling adult-use cannabis instead.

Importation of Hemp Products

In order to distribute cannabinoid hemp products manufactured out-of-state to cannabinoid hemp retailers within New York State, a distributor must have a cannabinoid hemp distributor permit, even if the distributor is out of state. The permit must specifically authorize importation of non-New York hemp. Notably, this includes online retailers, who must be licensed to sell into New York, even if they conduct no separate and distinct business in New York.

Delta-8 THC

New York is the latest market to expressly prohibit delta8-THC and delta10-THC in cannabinoid hemp products. Delta9-THC is the cannabinoid traditionally associated with the intoxicating effects of cannabis, and much of the regulatory scheme surrounding cannabis has been directed specifically at delta9-THC. Delta8-THC and delta10-THC are cannabinoids less potent than delta9-THC, but still known to have intoxicating effects. The regulatory focus specifically on delta9-THC created a “loophole” under which hemp processors could isolate intoxicating cannabinoids from otherwise legal hemp. Cannabinoid hemp products sold in New York may not contain synthetic cannabinoids, or cannabinoids created through isomerization, including delta8-THC. When this article went to print, eleven other states already had laws that address delta8-THC, while at least six other states were considering updating their laws regarding delta8-THC. Expect more changes to address specific hemp and cannabis derivatives as lawmakers and regulators continue to keep up with industry innovations.

The MRTA

With these new cannabinoid hemp regulations comes the million-dollar question: What does this mean for the newly-passed MRTA? MRTA provides that existing rules and regulations put in place by DOH that pertain to cannabinoid hemp will remain in place until the CCB and OCM take over the regulation of these products, and either adopt or repeal them. Beyond general alignment with DOH quality control standards, MRTA contains language that suggests CCB may impose additional requirements on the cannabinoid hemp industry, such as an additional permit for wholesale activities. However, expect OCM and CCB to borrow heavily from the work DOH has already done with cannabinoid hemp regulations.

Federal Compliance

To obtain a license to process cannabinoid hemp in New York, an applicant must submit its application to DOH. Among other things, the applicant must provide evidence that Good Manufacturing Practices (“GMP”) will be used in the extraction of hemp extract and manufacturing of cannabinoid hemp products. GMP regulations are promulgated by the federal Food and Drug Administration (“FDA”), and create a system for ensuring that products are consistently produced and controlled according to quality standards. Evidence of GMP can be provided in a number of ways, such as proof of a qualified third-party GMP audit of the applicant’s extraction or manufacturing process. In addition to processing practices, New York manufacturers must comply with all other FDA rules and regulations. Any cannabinoid hemp product that is intended to have a therapeutic or medical use—or makes claims about the ability to prevent, treat, or cure diseases—must go through FDA’s rigorous evaluation for new drugs. Manufacturers cannot get around this requirement by touting cannabinoid hemp products as “dietary supplements,” as consumers may have seen in the past. While FDA considers itself “committed to supporting the development of new drugs, including cannabis and cannabis-derived drugs,” it is particularly concerned that CBD and other cannabinoids are being endorsed as a treatment for all types of health problems without FDA evaluation of those claims. However, both FDA and the New York DOH exclude “cosmetics” from the many strict cannabinoid hemp requirements. A “cosmetic” is any article “intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body or any part thereof for cleansing, beautifying, promoting attractiveness, or altering the appearance.” DOH is currently taking applications for cannabinoid hemp licenses. Those looking to get started with hemp businesses while they await implementation of MRTA should pay close attention to these new changes, and monitor the progress of New York’s new cannabis regime.