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.
Report of New York State’s Office of Cannabis Management (“OCM”) Board Meeting, June 23, 2022
New York State’s Office of Cannabis Management (“OCM”) held a board meeting on June 23, 2022, with nearly 600 attendees in virtual attendance through online streaming. Continue reading “Report of New York State’s Office of Cannabis Management (“OCM”) Board Meeting, June 23, 2022”
New York Conditional Cultivation License – Advanced Preparation (What You Can Do Now To Be Ready)
As we noted is our blog post earlier this week, New York recently adopted legislation to allow licensed hemp farmers to grow and process cannabis for the adult use market with the aim to have product available once retail sales are permitted.
While the New York Office of Cannabis Management has yet to release the form of application (and any implementing regulations), that doesn’t mean that potential applicants should sit idly by and wait. In reviewing the legislation, its clear that there is plenty of work that can be done now. Continue reading “New York Conditional Cultivation License – Advanced Preparation (What You Can Do Now To Be Ready)”
Report of Office of Cannabis Management Board Meeting, November 3, 2021
The meeting was called to order at 1:00 p.m. by the Chairperson, Tremaine Wright, noting that all parties were present and Ms. Garcia was attending via remote contact. Ms. Wright stated that the meeting was being recorded and will be available on the Cannabis Control Board website. Ms. Wright indicated that the agenda would include opening remarks, approval of the minutes of the previous meeting and then a report by the Executive Director of the Office of Cannabis Management, Chris Alexander. She reminded the audience and the Board members that the law was passed March 31, 2021 and as a result, while some aspects were moving swiftly, much of the work being done was still preliminary. The work has been mostly staffing, hiring new employees and moving staff from other New York State departments, principally the Department of Health. Continue reading “Report of Office of Cannabis Management Board Meeting, November 3, 2021”
Notes from New York Cannabis Control Board Meeting, October 2021
By Michael D. Schwamm and Joy Karugu
There were several outcomes of the inaugural New York Cannabis Control Board (CCB) Meeting held on October 5, 2021. The Meeting revealed that the CCB and the Office of Cannabis Management (OCM) will be increasing their staff and taking steps to extend the medical cannabis program and cannabinoid hemp licensing. Also during the Meeting, Jason Starr was announced and voted in as the Chief Equity Officer of the OCM. He will work with Executive Director Chris Alexander in building New York’s social equity program. Continue reading “Notes from New York Cannabis Control Board Meeting, October 2021”
Cannabis Products Liability/Consumer Fraud Litigation and CBD Regulation
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
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
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.