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INSIGHT: CBD in New York—Differences in State, City Regulation Leave Questions

Jan. 10, 2020, 9:00 AM

The absence of clear federal guidance regarding food and beverages that contain cannabidiol (CBD) has led to a patchwork of state-level regulatory actions across the country. Without uniform guidelines, states have adopted varying and often conflicting approaches.

Some states, like Iowa, have restricted consumer access to CBD. Other states, like Oregon and Colorado, have adopted more permissive positions. Now, New York state has codified sweeping new standards regarding the manufacture and sale of CBD products.

The new law will help provide much needed clarity to the regulation of products containing CBD, but there are important gaps the statute has yet to fill.

The New Statute

Effective March 8, 2020, the new law (S6184A/A7680A) provides for the licensing and oversight of industrial hemp and hemp extract. Under the law, products containing CBD that are intended to be used or consumed by humans or animals would generally be classified as “hemp extract” products.

The statute further provides that state officials are authorized to establish grades and standards for hemp extract products, and any hemp extract product sold in New York must meet the state’s requirements. These requirements include, among other things, obtaining independent laboratory testing of products, adding particular labeling language and warnings to products, and identification of the applicable growing region.

Over the next few weeks, new state regulations will clarify the required licenses, testing, and warnings required for products that contain hemp extract that are intended for sale in New York State.

Food and beverage products are a point of contention among the collage of state CBD regulations. For example, Maryland prohibits the sale of food products containing CBD; Maine initially did so as well, but then reversed course.

With its new law, New York state distinguishes between food and some beverage products containing CBD. For beverages containing less than 20 milligrams of CBD per 12 ounces, a regulatory pathway for approval is set for early April 2020.

Critically, for other food and beverage products, Gov. Andrew Cuomo (D) acknowledged that the new law largely delays the state’s “decision making on hemp extracts, including CBD, as additives for food and beverages” as state legislators and regulators continue to refine the details of the state’s requirements. This deferral is important, as exemplified by New York City’s ongoing enforcement efforts against food and beverages that contain CBD.

New York City’s CBD Clampdown

In 2019, New York City health officials cracked down on the use of CBD in food and beverage products. According to the city’s Department of Health, the city’s health code “prohibits adding CBD to food or drink, including in packaged food products,” and sellers risk fines and potential negative marks on their restaurant inspection grade.

City health department authorities made numerous visits to restaurants to embargo the sale of CBD-containing food and beverage products and ordered that products must either be discarded or returned to the supplier.

Starting Oct. 1, the city’s health department started issuing fines for the sale of CBD-containing food and beverage products, which range from $200 to $650 per violation. In a written statement, the city’s health department noted that it would advise its stakeholders if and when “FDA updates its guidance” regarding CBD or “if there are changes in New York State law.”

Given that New York state’s new law will alter regulatory oversight regarding products that contain hemp and hemp derivatives, including those containing CBD, the industry should watch for how state officials might clarify how the new law will square with New York City’s existing bar on selling food and beverages that contain CBD.

For the time being, companies seeking to sell food and beverage products in New York City containing CBD should proceed with caution. The treatment of food and beverage products containing CBD is one of the many areas that will be hammered out through legislative and regulatory clarifications before the new law’s effective date in March 2020.

The Road Ahead

The formulation of uniform standards will take time for the burgeoning CBD industry. The Food and Drug Administration held a public meeting regarding CBD regulation in May 2019, and New York state is planning a “hemp summit” in January.

The FDA also revised its Consumer Update regarding CBD to state that is “currently illegal to market CBD by adding it to a food or labeling it as a dietary supplement.” Meanwhile, the agency is exploring “potential pathways for various types of CBD products to be lawfully marketed.”

New York State’s new statute is an important step to filling the regulatory vacuum left by the FDA with respect to CBD standards. Even so, there are important limitations to the statute given that many of its terms are yet to be defined and clarified by forthcoming regulations. For example, just how the new law will affect New York City’s current embargo of CBD-containing food and beverage products remains to be seen.

Looking ahead to 2020, the CBD industry appears poised for growth, but this growth is likely to come with increased scrutiny by federal and state regulators. Many producers would welcome national standards on CBD products, especially those related to food and beverage products.

Given the lack of a clear regulatory framework nationwide, industry should mind the federal regulatory gap and stay attuned to local developments affecting CBD businesses.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Barak Cohen is a partner in Perkins Coie’s Washington, D.C., office, where he focuses on government and internal investigations, and providing compliance advice in highly regulated industries, particularly the cannabis industry. He is the editor of the ABA’s forthcoming cannabis law treatise, and a member of the National Cannabis Industry Association’s policy council.

Tommy Tobin is an associate in Perkins Coie’s Seattle office, where he focuses on complex commercial litigation and class action matters involving statutory, constitutional and regulatory issues in a range of industries, including food and beverage, healthcare, and pharmaceuticals. He regularly writes articles on food law and policy issues and is co-chair of the American Bar Association’s Food, Cosmetics, and Nutraceuticals Committee.

Michael C. Bleicher is an associate in Perkins Coie’s Privacy & Security practice. He focuses on matters involving the application of the Electronic Communications Privacy Act, intersections between privacy and national security matters, and general counseling for companies ranging from startups to blue chip firms.

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