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Cannabis in New York: What You Need to Know

Cannabis has become a hot topic amongst policymakers and business leaders across New York in recent years. Hemp cultivation has seen yearly expansion, CBD products are sold statewide, and adult-use legalization has been gaining momentum in the state legislature. Alongside this explosion in popularity, NYS has and continues to establish various regulations across all cannabis-related industries. As these various regulations come into effect and as New York begins to adapt to federal guidelines, here are five things to look out for in the NY cannabis industry. 

#1. The Hemp Extract Bill is Now in Effect.

On May 1, 2020, the Hemp Extract Bill came into effect. This bill was the final product of a lengthy legislative effort to transition from the State’s pilot research program to a full-fledged commercialized marketplace. Major goals included establishing labeling and manufacturing standards, creating a more flexible and business-focused licensing structure, and ensuring consumer safety for all hemp extract products sold in New York. While the bill was enacted in May, its provisions will not be enforced until 2021. This interim period will be used to establish various rules and regulations as stipulated in the bill. It will also be used to transfer authority over hemp extract to the NYS Department of Health, the agency that currently regulates the State’s medical marijuana program. Some major changes the industry can expect include:

  1. New licensing for processors and retailers

  2. Enforcement of the GMP 111 manufacturing standards for licensees and out of state products 

  3. Clear rules and regulations around flower, vape, and beverage products 

  4. Allowing growers to step into the retail and manufacturing businesses 

  5. Increased recognition and consumer confidence for New York products

#2. The USDA Plan & the Termination of the NYS Pilot Program.

In 2014, the Agricultural Improvement Act (also known as the 2014 Farm Bill) removed hemp from the schedule of controlled substances. This allowed states to establish research pilot programs for industrial hemp cultivation. New York quickly adopted and expanded its own research pilot program, the Industrial Hemp Research Initiative, under which all hemp growers in the state have been licensed. This pilot program will terminate in November, however, and will be replaced by a new state program. 

Hemp growers will continue to be licensed through the NYS Department of Agriculture and Markets (DAM) and shouldn’t expect many immediate changes to their operations. However, DAM has let growers know that their research partner agreements will terminate on November 1st. The termination of the pilot program is part of the USDA federal regulations on hemp, which were given in its interim final rule. The USDA ruling allows states to create their own state plans for hemp cultivation rather than work directly through the USDA, so long as these plans receive USDA approval. As of August 2020, New York State has chosen not to submit a state plan to the USDA, ending the authority of DAM in hemp cultivation.

#3. CBD in Food and Beverages?

The addition of CBD in food and beverages has driven the popularity of hemp nationwide, despite the often–misunderstood regulations surrounding these products. On the federal level, CBD is not allowed as an additive to food and beverages. According to the FDA, CBD foods and beverages would need to qualify as dietary supplement products to be allowed as an additive. However, since the FDA does not recognize CBD as a dietary supplement, and only considers three hemp products as “generally recognized as safe” (hulled hemp seed, hemp seed protein powder, and hemp oil), CBD is not technically permitted in foods and beverages.

Because the FDA lacks the resources to fully enforce this ruling, many state programs have established their own hemp-extract regulations with differing opinions on CBD. In New York, the Hemp Extract Bill does not take an explicit stance – Governor Cuomo’s office intentionally considered this a “deferment of a decision.” However, if the product is produced and labeled as a dietary supplement it is legal in New York, opening the door to products such as gummies and certain portioned confections along with beverages similar to popular energy “shots”. We expect several producers in New York to begin marketing supplement products in the form of food or beverage products, but do not expect this to be a permanent solution. 

CBD in food and beverages will almost certainly be one of the major issues as the rules and regulations of the Hemp Extract Bill get hammered out before their likely release this fall. State lawmakers and officials seem optimistic about regulating CBD in foods and beverages that could serve a boost to the statewide hemp industry. With numerous beverage and food products on the shelves already – it would make sense for the Department of Health to issue quality and labeling guidelines instead of taking the route New York City health officials did last year, threatening to embargo any such products. This approach backfired publicly and arguably had little effect across the city’s thousands of stores. Ultimately, it may take further legislation to expand cannabinoid-based products from supplements to food & beverage. 

#4. Could Adult-Use Still Pass in 2020?

Before the outbreak of the Coronavirus pandemic in March of this year, the legalization of adult-use cannabis enjoyed increasing support and was a hot-button issue of this year’s legislative session. However, as April 1st approached, it became clear that adult-use legalization was ultimately not going to be included in Governor Cuomo’s budget, as further legislative discussions surrounding the bill could not take place.

Although legalization failed this past session, it continues to remain a pressing issue for both lawmakers and constituents alike – this momentum will not disappear soon. For many lawmakers, legalization is not a question of if, but when, and the ability to reach a comprehensive piece of legislation that addresses the major points of legalization, specifically tax revenue allocation, is essential for its success. While legalization in 2020 may be out of the question due to more pressing legislative matters, adult-use legalization will remain one of the major points within the NY cannabis industry. Further legislative developments next year could be expected, however opposition from NY suburbs might further delay any legalization effort.

#5. Will the Medical Program be Expanded?

New York’s medical marijuana program has continued to expand ever since its initial establishment in 2014. Since then, numerous regulations have been introduced which, among other things, expanded the list of qualifying conditions, eased financial complications for patients, and increased the number of registered organizations in the state.

Earlier this month, for instance, the Department of Health expanded analytical testing for medical-use. The department created a new “solicitation of interest” form which would allow commercial laboratories to begin medical-testing operations in NYS. In addition, three different medical expansion bills were introduced into the state legislature earlier this year. These were met with varying degrees of success, but none of these expansion efforts were fully realized. These results are largely due to the Coronavirus pandemic, but the need to expand the program remains. Given the continued expansion efforts since 2014 and the history of regulatory updates for the MMP, further expansion of the medical program is almost certain.

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