Minnesota Legislation Ushers In Sales of THC-Infused Beverages

Even absent a federal regulatory framework, the demand and market for cannabis-infused beverages continue to grow nationwide. As states legalize marijuana for medical and adult use, some have enacted specific provisions for the sale of food and beverages containing THC. Minnesota recently passed one such law, which became effective in early July. In Minnesota, medical marijuana is permitted for the treatment of certain medical conditions, but adult use legislation has not yet been passed. The state’s new law legalized the sale of food and drinks containing up to 5 mg of THC per serving, and 50 mg total per package – so long as the THC is derived from certified hemp plants. Under federal law, hemp plants – as opposed to marijuana plants – can contain no more than .3% THC by weight. These content limits apply to all strains of THC, including Delta 8, which is currently not federally regulated.

Minnesota’s new law prohibits THC-containing products from being sold to anyone under 21 or marketed to children. The products must be sold in tamper-proof packaging, and packages must contain a QR code that provides consumers with an ingredient list and testing information. The law is also different from other states’ legalization regimes in one major respect: while other states only permit sales of these products by licensed distributors, Minnesota places no restrictions on who can sell edibles or beverages containing THC. This also means that sellers are not subject to a lengthy application process. Businesses in Minnesota have wasted no time in benefitting from this legislation. Demand for THC-infused gummies has been high since their legalization, and beverage companies and breweries have already entered this new market. Minneapolis Cider Company introduced a non-alcoholic sparkling beverage called Trail Magic, which contains 3 mg of THC per serving, bringing the product to launch within a month of the law’s passage. Indeed Brewing, also in Minneapolis, introduced Two Good, a seltzer containing 5 mg of THC and 2 mg of CBD, in early August. While Minneapolis Cider Company sells Trail Magic for visitors to consume in its taproom, Indeed currently only offers Two Good for to-go sales. Both companies are selling their THC beverages as an alternative to alcoholic beer or cider, and both beverages have been popular with consumers since their introduction.

Market participants in Minnesota are still navigating the contours and nuances of the new law, as are those in many other states. But as states continue to legalize various forms of THC sales, it is likely that beverages like Trail Magic and Two Good will become more ubiquitous.

Bipartisan Subcommittee Promotes Inclusion of Hemp Regulations in 2023 Farm Bill

On July 28, the House of Representatives’ Subcommittee on Biotechnology, Horticulture, and Research held a hearing to discuss ways in which the upcoming 2023 Farm Bill could improve the regulatory landscape for hemp and CBD producers.  Congress passes a Farm Bill every five years – the 2014 Farm Bill lifted federal restrictions on the cultivation and production of hemp, and the 2018 Farm Bill authorized commercial production of hemp, subject to oversight by the U.S. Department of Agriculture.  However, as discussed at length during the July 28 hearing, the Food and Drug Administration (FDA) has not approved CBD as a food or beverage additive or as a dietary supplement – though it has approved one CBD-derived prescription drug for treating seizures.  Despite a surge in hemp cultivation and production following the 2018 Farm Bill and a large market for CBD-based products, demand for hemp has not kept pace with production, as many companies are reluctant to enter the CBD market without clear regulatory guidance from the FDA.

Participants in the July 28 hearing discussed ways to address this regulatory uncertainty and other barriers to entry into the hemp and CBD marketplace.  Both the House and Senate have introduced bills to permit the sale and marketing of CBD as a food additive and dietary supplement.  Another bill introduced in February, the Hemp Advancement Act, was a key focus of the hearing.  This bill includes among its key provisions increasing the THC threshold for hemp from .3% to 1%; eliminating the federal requirement that hemp sold in the U.S. be tested for potency by labs registered with the FDA, which do not exist in all states; and eliminating a ten-year waiting period for people with drug-related felony convictions seeking hemp production licenses.  Other proposed inclusions in the 2023 Farm Bill discussed at the hearing are measures to lower fees for hemp sampling/testing and removing background check requirements for production licenses.  Rural areas – where many hemp producers seek to operate – often lack facilities that process fingerprints, posing another barrier to market entry.

The Subcommittee hearing was led by a bipartisan collection of representatives, mainly from hemp-producing states, who share the goals of achieving greater regulatory certainty and market stability for the growing hemp industry.  The proposals discussed could support rural agricultural economies and facilitate greater equity within the industry, and many lawmakers and market participants see the 2023 Farm Bill as a necessary next step in the development of the fast-growing hemp industry.

New York State Cannabis Advisory Board’s Inaugural Meeting

On June 30, 2022, the New York State Cannabis Advisory Board (the “Advisory Board”) held its inaugural meeting. Axel Bernabe, the Chief of Staff and Senior Policy Officer at the New York State Office of Cannabis Management, provided some opening remarks noting that the Advisory Board has been in the making for nearly four (4) years. The Advisory Board is comprised of twenty members from the entire State of New York. Advisory Board members were each introduced and include a wide variety of background and experience, including careers such as farmers, public servants, doctors, attorneys and community leaders.

One of the primary purposes of the Advisory Board is to oversee the disbursement of the New York State Community Grants Reinvestment Fund (“Reinvestment Fund”). The Reinvestment Fund will be comprised of thirteen (13) voting members, and also ex-officio members to represent other state agencies. All Reinvestment Fund members will serve three (3) year terms. The Reinvestment Fund is meant to stimulate and rejuvenate small businesses in communities that were negatively affected by cannabis prohibition.

The Advisory Board will also be actively involved with the Cannabis Control Board, and strives to become actively engaged with drafting regulations and advising the Cannabis Control Board’s decisions. Further, with the Advisory Board members’ wide breadth of experience and background in the cannabis industry, the Advisory Board hopes to provide a distinct opinions and insight for the regulations that the Cannabis Control Board considers.

Nearly all Advisory Board members expressed excitement about the opportunity to create an equitable and inclusive cannabis industry. Advisory Board Member, Peter Schaffer, owner at Nanticoke Gardens, expressed his excitement at bolstering New York’s cannabis industry and potential collaboration with cannabis and beverages. Further, Junella Chin, an Integrative Medical Cannabis Physician, spoke of the healing properties of cannabis and making cannabis treatment more available to patients who could benefit from such treatment. Advisory Board member, Gary Johnson is Chair of the National Association for the Advancement of Colored People New York State Economic Development, and expressed interest in the Advisory Board’s future in imparting equity to groups that have been traditionally treated negatively by past cannabis based legislation.

Why Cannabis Beverages are a Good Bet

Constellation Brands, Boston Beer, Molson Coors, PepsiCo, Jones are some of the beverage companies betting on drinks with THC or CBD, adding them to their beverage product lines, as are cannabis drink makers like CANN Social Tonics, Keef, and Artet.  Here’s why:

Just about everyone enjoys socializing with a drink in their hand. Wherever people are gathering, from couples to small groups to large events, whether at a bar, cocktail party, friends/family get together, a game or other outing, most people have a drink in their hand.  Years ago cigarettes were as ubiquitous in social settings, but those days are long gone – smoking, because of its health effects and smell, has become obsolete if not shunned.   The same stigmas seem even more pronounced when it comes to smoking or vaping cannabis, plus there is the added stigma of “getting high,” which, for some reason, as a general matter, seems less socially acceptable than “getting drunk.”  Cannabis drinks are not burdened by these stigmas.

Moreover, just like alcoholic beverages, cannabis drinks allow the consumer more control over their psychoactive experience.  Just as consumers use beer, wine, and spirits for a range of intoxication, cannabis drinks can be consumed in the same way.  A few sips of a cannabis beverage with 10 mgs of THC may be enough for some to get a slight euphoric buzz that does not interfere with their socializing like a beer or two might give someone a slight buzz that does not interfere with their socializing.  In this way, cannabis beverages stand in contrast to high-THC products like vapes, butter, and shatter, just as shots of tequilla, vodka, and jager stand in contrast to beer and wine.

Cannabis drinks are a good bet because they largely avoid the stigmas of smoking and getting high, and, in so doing, make THC and CBD accessible to consumers who have withheld from using cannabis because of them.  Add to that the flexibility and control of micro-dosing, and cannabis drinks become more appealing to more people in more social situations.  This is why beverage companies and cannabis companies are betting on cannabis drinks.

 

Cannabis Beverages are on Fire! — THC Limits

In the second edition, and first substantive blog, in my series on Cannabis Beverages, entitled Cannabis Beverages are on Fire!, I am writing about THC limits, which is one of the hot-button issues for cannabis beverage producers and consumers.  Given its psychoactive effect, there is no denying that the amount of THC in a beverage should be measurable and limited so that consumers can safely ingest them and obtain the experience they are seeking. This means that a serving size of a beverage might have a THC limit, and so might there be a total container limit.

Cannabis beverage manufacturers are not starting from scratch in this area, however. Popular THC serving size limits in edibles and similar products include 5mg and 10mg could likely be applied to THC beverages, resulting in a total container limit based on the container size and number of servings. The current offerings of cannabis-infused drinks vary and the markets within states offer a wide variety of different THC levels. For example, Cann, a bestselling THC drink, contains 2mg THC and 4mg CBD per 12 ounce can. Cann is available in over 200 California dispensaries. Similarly, Tomato Jane drinks have 10mg THC per 12 ounce bottle. Comparatively, Matt’s High Soda offers an infused beverage called Uncle Arnie’s Iced Tea Lemonade with 100mg of THC per bottle—although each bottle is considered to be 10 servings.  As the market for cannabis beverages develops, THC limits are certain to be an issue that gets a lot of attention.  In the next installment of this series I’ll touch on cannabis beverage ingredients and labeling.

Cannabis Beverages are on Fire!

Want to know where the cannabis industry is going? How about the beverage industry? The answer is cannabis beverages! The hottest new product segment in both markets. Don’t believe me… just run an internet search for “cannabis beverages” and you’ll see cannabis-infused beverages tied to major beverage companies like Constellation Brands, such as Canopy Growth’s Quatreu water, and Molson Coors, with its Truss brand, and dozens of  smaller cannabis beverage brands, such as Forth, Kikoko, and Recess. 

A cannabis beverage generally contains either THC derived from marijuana grown pursuant to state adult-use marijuana and/or medical marijuana laws, or containing CBD derived from marijuana or derived from hemp grown pursuant to a state’s hemp laws.  Given the federal prohibition on marijuana, the federal legality of hemp, and the FDA’s current restriction of CBD in foods and beverages, the federal and state regulatory framework for producing, distributing, and consuming cannabis beverages is complex, to say the least.  In the coming weeks I will be covering in a series of short blogs some of these issues, including product labeling, THC and CBD percentages, serving size, and social consumption.

Cannabis Products Liability/Consumer Fraud Litigation and CBD Regulation

Seth Goldberg
Seth A. Goldberg

Yesterday, a California court federal court judge did not follow other federal courts in staying a consumer class action brought on behalf of CBD product consumers on the basis of the FDA’s primary jurisdiction over the regulation of CBD products.  The Court in Rodriguez v. Just Brands USA Inc. et al., 2:20-cv-04829, C.D. Cal., determined that claims that CBD product maker Just Brands’ labeling did not accurately state the amount of CBD in its products could give rise to state law claims for breach of warranty  and fraud that should not be stayed because, according to the Court, the FDA’s forthcoming regulations would not alter the expectation that CBD product manufacturers would accurately convey the amount of CBD in their products.  

The decision in Rodriguez should be on the radar of the entire cannabis industry, as it demonstrates how products liability and consumer class action lawsuits may be brought under state statutory and common law to seek damages for improperly labeled cannabis products.  Cannabis – hemp and marijuana – product manufacturers should be sure to build into their internal compliance safeguards against such claims.  

Relatedly, on the radar for hemp-derived CBD is legislation proposing to categorize CBD as a dietary supplement under the FDA’s regulatory regime for drugs, dietary supplements and foods and beverages under the Food, Drugs and Cosmetic Acts. That bill will be introduced today by Sens. Ron Wyden (D-Ore.), Rand Paul (R-Ky.), and Jeff Merkley.  

 

FTC Approves Consent Orders Against CBD Manufacturers

Seth Goldberg
Seth A. Goldberg

As I previously wrote, in December 2020 the FTC announced consent agreements reached with CBD manufacturers 1) Bionatrol Health, LLC; 2) Epichouse LLC (First Class Herbalist CBD); 3) CBD Meds, Inc.; 4) HempmeCBD; 5) Reef Industries, Inc.; and 6) Steves Distributing, LLC, in connection with a “crackdown” the FTC termed “Operation CBDeceit” for allegedly spurious health claims. The FTC today followed up that announcement with an announcement that those consent orders have been approved by the FTC in unanimous votes as to each. These manufacturers will now be required to comply with the consent orders, which could include fines and ceasing to make “unsupported health claims” in connection with the marketing of their products. 

FTC Ratchets Up Enforcement Against “Spurious” CBD Health Claims

Seth Goldberg
Seth A. Goldberg

In connection with a crackdown on CBD manufacturers pursuant to its “Operation CBDeceit,” the FTC announced today settlements with six CBD-infused product manufacturers who, according to the FTC, allegedly made a “wide range of scientifically unsupported claims about their ability to treat serious health conditions, including cancer, heart disease, hypertension, Alzheimer’s disease, and others.” Under the settlements of the respective Complaints against them, each of the manufacturers will be required to pay a fine, and cease making “unsupported health claims” in connection with the marketing of their products.

In issuing its press release today the FTC attached the Consent Agreement and the FTC’s findings of violations of the FTC Act, which are set forth in a draft Complaint. These documents illustrate the FTC’s procedures in actions like these, and highlight the FTC’s concerns regarding allegedly misleading representations about CBD-containing products in violation of the FTC Act. Specifically, the FTC views health claims in connection with marketing such products to be misleading unless they “rely upon competent and reliable scientific evidence that is sufficient in quality and quantity based on standards generally accepted by experts in the relevant disease, condition, or function to which the representation relates, when considered in light of the entire body of relevant and reliable scientific evidence, to substantiate that the representation is true.”

Significantly, the FTC has not required the settling manufacturers to remove their products from the shelves and to cease selling them. They must, however, remove any unsupported health claims. Moreover, it would not be surprising if the announcement of these settlements spawns consumer fraud litigation against the manufacturers, which is often a much more serious concern to the business.

It is unclear how “Operation CBDeceit” will be implemented when the Biden administration takes over. For now, however, CBD manufacturers should continue to be mindful of their packaging, labeling and other marketing materials.

State-Legal Marijuana a Clear Winner in 2020 Voting

Seth Goldberg
Seth A. Goldberg

Voters in the five states where the legalization of marijuana was on the ballot voted in favor.

In the populous states of New Jersey and Arizona, voters legalized marijuana for recreational use by adults over the age of 21. Given New Jersey’s proximity to New York and Pennsylvania, where medical marijuana programs have been popular, legalization in New Jersey could have a domino effect in the northeast, especially considering the tax revenue that will be gained by New Jersey from New York and Pennsylvania residents who travel there every day for work, the Jersey shore and casinos, and other reasons.

Voters in South Dakota and Montana also voted to legalize marijuana for recreational purposes, South Dakota voters also approved medical marijuana, and voters in Mississippi voted to legalize marijuana for medical purposes to treat 22 qualifying health conditions.

Seth Goldberg is a Team Lead of the Cannabis Industry Practice at Duane Morris

© 2009- Duane Morris LLP. Duane Morris is a registered service mark of Duane Morris LLP.

The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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