Marihuana Regulation and Taxation Act (MRTA) The Marihuana Regulation & Taxation Act (MRTA) was signed into law on March 31, 2021 legalizing adult-use cannabis (also known as marijuana, or The explosive growth of consumer products containing hemp-derived cannabidiol (CBD) has increased exponentially in the past few years, as demand for the novel FDA regulation of CBD products faces new challenges as the market develops.
Marihuana Regulation and Taxation Act (MRTA)
The Marihuana Regulation & Taxation Act (MRTA) was signed into law on March 31, 2021 legalizing adult-use cannabis (also known as marijuana, or recreational marijuana) in New York State. The legislation created a new Office of Cannabis Management (OCM) governed by a Cannabis Control Board to comprehensively regulate adult-use, medical, and hemp cannabis. The OCM will issue licenses and develop regulations outlining how and when business can participate in the new industry.
Proposed Rule Making
The regulatory process in the State of New York is governed primarily by Article 2 of the State Administrative Procedure Act (SAPA) . This process is administered in the Office of Cannabis Management Legal Division .
To initiate a regulatory proposal, SAPA requires submission of a Notice of Proposed Rulemaking to the Secretary of State for publication in the New York State Register . If no public hearing is required, the notice must precede adoption by at least 60 days (45 days for revised rulemaking). Publication by the Secretary of State is the primary means of giving notice of proposed actions. However, any person or entity may file a standing request to receive notices from the Department directly.
If the text of the proposed notice exceeds 2,000 words, only a description of the subject purpose or substance of the rule will be published in the New York State Register . Similarly, if the text of the Regulatory Impact Statement, Regulatory Flexibility Analysis, Rural Area Flexibility Analysis and/or the Job Impact Statement exceeds 2,000 words a summary is required. To ensure the widest possible and most timely outreach, in conjunction with submission to the Secretary of State, the Office will post the complete version of all regulatory notices at this website.
Questions or comments on the proposed regulations should be directed to: [email protected]
or mailed to us at:
New York State Office of Cannabis Management PO Box 2071 Albany, NY 12220
The ‘State’ of CBD when Added to FDA-Regulated Products
The explosive growth of consumer products containing hemp-derived cannabidiol (CBD) has increased exponentially in the past few years, as demand for the novel ingredient continues to stoke interest from those ranging from the ‘merely curious’ to the ‘loyal believers.’ To many, CBD offers a variety of benefits when ingested, inhaled, or applied topically – with product marketing and advertising claims similarly ranging from calming effects to pain relief. Not surprisingly, therefore, the number of CBD-containing products that appear on store shelves has increased rapidly, presenting both opportunity and risk. Federal regulation has struggled to keep up, and in the absence of action and enforcement, states and localities have rapidly filled the void. Retailers, manufacturers, and consumers alike, therefore, need to be knowledgeable about requirements for the production, marketing, retail sale, and consumption of CBD-containing products – even where such requirements seemingly conflict across state lines.
Federal Regulation of CBD
Prior to 2014, it was illegal under federal law to grow, market, or distribute any part of the Cannabis sativa L. plant in the United States – including marijuana and hemp. Marijuana and hemp are both members of the Cannabis sativa family, and CBD can be derived (extracted) from both. The primary difference between the two varieties of the plant pertains to the amount of delta-9 tetrahydrocannabinol (THC) content present during growth and at cultivation. THC is a psychoactive agent, found at varying concentrations in Cannabis sativa L. The level of THC is influenced by a variety of factors, including the genetic profile of the plant, and the specific growing conditions that the plant is subjected to. Generally speaking, hemp typically contains significantly lower levels of THC and, depending on the variety, substantially higher levels of CBD than marijuana.
Marijuana is a Schedule I substance under the Controlled Substances Act (CSA), the most restrictive category of controlled substances. The CSA prohibits the possession and distribution of Schedule I-controlled substances without prior registration with, and approval by the Drug Enforcement Administration (DEA), including Cannabis sativa L. that contains more than 0.3% THC content. Prior to 2014, hemp and marijuana were regulated together under the common definition of marijuana.
Beginning in 2014, Congress granted special authority to the states to permit the growth and cultivation of “industrial hemp” under agricultural pilot programs. Industrial hemp was specifically defined under the 2014 Farm Bill to include Cannabis sativa L. containing less than 0.3% THC on a dry weight basis, thereby creating a distinction between hemp and marijuana under the purview of certain federal regulations, including those administered by the US Department of Agriculture (USDA). It wasn’t until the passage of the 2018 Farm Bill, however, when Congress effectively removed hemp from the statutory definition of marijuana, thereby exempting hemp from being included as a Schedule I-controlled substance under applicable DEA regulations. 1 The 2018 Farm Bill further loosened restrictions pertaining to the growth, cultivation, and distribution of hemp, permitting the individual states to implement licensing programs (consistent with USDA regulatory requirements) for individuals to grow, process, and distribute hemp and hemp-derived products. Following implementation of the 2018 Farm Bill, and subject to applicable federal and state requirements, therefore, hemp containing less than 0.3% THC is legal in all 50 states. Notably, the 2018 Farm Bill represents a floor, and not a ceiling – states are permitted to implement more restrictive requirements pertaining to the production, sale, and labeling of hemp and hemp-derived products, including those containing CBD.
Food and Drug Administration Authority
The Food and Drug Administration (FDA) regulates cannabis and cannabis-derived compounds under the Federal Food, Drug, and Cosmetic (FD&C) Act (21 U.S.C. § 301, et seq.) as it would any other compound present in any otherwise FDA-regulated product. On this basis, biologics, cosmetics, drugs, food, animal feed, medical devices, and tobacco products containing CBD or any other hemp-derived component fall under FDA jurisdiction and are subject to applicable laws and regulations administered by the agency, without regard to individual state laws.
Consistent with the FD&C Act, and subject to limited exceptions or exemptions, substances added to drugs and food are subject to premarket approval by the agency. In practice, and to-date, FDA has taken a cautious and restrictive approach to the regulation of CBD. For example, only one CBD-containing drug – Epidiolex® – is presently authorized for use as a drug; similarly, only three hemp seed-derived substances have been affirmed by FDA as Generally Recognized as Safe (GRAS) for direct addition to food. 2 GRAS substances are exempted from the definition of the term “food additive” under the FD&C Act, and therefore, are not subject to premarket approval by FDA. For reasons not discussed in detail in this article, and subject to a provision of the FD&C Act, the approval of Epidiolex® effectively prohibits industry from making self-GRAS determinations for the addition of other CBD-based ingredients when added to food. 3 Similar provisions prevent industry from marketing CBD as a dietary supplement without premarket approval by FDA.
Unlike the other categories described above, however, cosmetics (and most ingredients used in the manufacture of cosmetics) are generally not subject to premarket approval by FDA. For this reason, a cosmetic containing hemp-derived CBD may be manufactured, marketed, and sold to consumers without prior explicit “clearance” or “approval” from FDA, provided that the use of CBD, and other ingredients used in the manufacture of cosmetics, is safe. FDA retains the authority to prohibit or restrict the use of certain ingredients in the manufacture of cosmetics (a so-called “negative list”) by way of regulation, but, as of the date of this article, cannabis, hemp, and CBD do not currently appear on this list.
In view of the regulatory landscape discussed above, a significant portion of any legal analysis regarding the suitable status of a hemp-derived CBD product – particularly consumer products sold at retail – necessarily relies on the scope and breadth of claims made on product advertising and labeling. Products that are intended to be sold at retail as cosmetics may contain certain claims that cause the product to become an unapproved drug, dietary supplement, or a misbranded food for purposes of FDA’s existing regulatory authority. Even where product labeling and advertising otherwise complies with FDA requirements for cosmetics, risks remain with labeling that purposefully or inadvertently results in consumer deception (i.e., CBD content claims). For this reason, FDA works in close coordination with the Federal Trade Commission (FTC) to ensure that product labeling and advertising is not unfair or deceptive, under Sections 5 and 12 of the Federal Trade Commission Act. 4 FDA and FTC have issued a number of combined agency warning letters to industry over the past few years, specifically targeting companies that made unsubstantiated claims targeting sensitive or vulnerable subpopulations. 5 For this reason, manufacturers and retailers should pay careful attention to not only the nature of the claim(s) (e.g., whether the product is intended for use as a cosmetic or a drug), but also whether the otherwise-authorized claim(s) are properly substantiated.
The States Step In
The 2018 Farm Bill provides states with authority to exercise “primary regulatory authority over the production of hemp,” provided that the state either submits a plan to monitor and regulate such production and receives approval from USDA, or otherwise adopts an equivalent plan as outlined by the USDA. 6 While the 2018 Farm Bill is silent with regard to the retail sale of such products, states have effectively stepped in to fill this void through explicit regulation or informal guidance – often through each state’s Department of Agriculture or equivalent regulatory agency.
In the perceived absence of action at the federal level – particularly with regard to the enforcement of FDA-regulated products – states have imposed additional regulatory requirements that range from expressly permitting the addition and retail sale of CBD-containing products sold at retail (without regard to the FDA considerations discussed above), to expressly prohibiting the sale of products not otherwise authorized at the federal level. Beyond federal regulations, certain states have implemented further requirements pertaining to the labeling of CBD-containing products, as well as the registration and licensing of facilities that market or sell products to consumers. Approaches vary significantly across state lines, as evidenced by the examples below:
- West Virginia takes a generally-permissive approach to the retail sale of products containing CBD, as evidenced by a publication issued by the West Virginia Department of Agriculture, entitled: West Virginia Hemp Products Guide. 7 Examples of permitted hemp-derived products include: concentrates or extracts, edibles and drinks, topicals and lotions, hemp seed pressed or otherwise processed into oil, aerosols, vaping products, and smokable hemp products. Notably, manufacturers and retailers of hemp products available for distribution within the state are required to register annually with the West Virginia Department of Agriculture (regardless of whether such products are manufactured inside or outside the state).
- Indiana does not explicitly regulate consumer products by category, instead addressing CBD-containing consumer products under the definition of “low THC hemp extract.” 8 A person may distribute low THC hemp extract in Indiana if: (1) the product has been approved by FDA or DEA as a prescription or over-the-counter drug; or (2) otherwise meets the requirements of the FD&C Act. Such products must, however, be labeled with a scannable bar code or QR code linked to a document or website that contains “information with respect to the manufacture of the low THC hemp extract,” including requirements that go well-beyond those specified under federal law. For this reason, retailers must ensure that cosmetics that may otherwise be authorized for retail sale under applicable federal requirements explicitly comply with provisions set forth by the state of Indiana. To satisfy Indiana requirements, retailers often must work closely with manufacturers and distributors to obtain relevant quality control information.
- Maryland generally permits the retail sale of cosmetics containing hemp-derived CBD, consistent with federal law. However, the state makes clear that products for which CBD has not yet been authorized for addition – such as food, remains expressly illegal for sale or distribution in the state. 9 On this basis, food to which hemp-derived CBD has been added (other than the three GRAS substances discussed above) is not yet authorized for retail sale in Maryland.
As the federal government continues to evaluate the safety and efficacy of hemp-derived CBD when added to products where premarket approval is required – such as drugs, dietary supplements, and food – states continue to move forward with implementing regulatory policies and approaches that serve to either: (1) promote the development and growth of the state’s CBD industry; and/or (2) align with federal requirements. As evidenced by the three examples provided above, state regulation does not always neatly comport with existing federal regulation of CBD, creating substantial confusion and a rapidly-changing landscape in the marketplace.
Companies would be well-served by evaluating and understanding the specific regulatory requirements applicable to the growth, processing, distribution, and consumption of hemp-derived CBD and CBD-containing products in each state where the company intends to do business or distribute product. Similarly, individuals should exercise caution when purchasing and consuming CBD-containing products that may be widely available – but may not yet be authorized at the federal or state level. While FDA continues to focus its limited resources on addressing the most egregious examples of products placed on the market without premarket approval (i.e., those directed toward children and other sensitive subpopulations), the agency will necessarily continue to move forward with considering novel uses of CBD in drugs, dietary supplements, foods, and tobacco products in time – when presented with appropriate safety data needed to support such use. In the meantime, companies that market cosmetics containing hemp-derived CBD to consumers should exercise caution and continue to ensure that both the CBD and the finished product containing CBD meets all applicable federal, state, and local regulatory requirements.
High Hopes for FDA Regulation of CBD Products
FDA regulation of CBD products faces new challenges as the market develops.
Move over Pfizer, Moderna, and Johnson & Johnson: Some purveyors of cannabis products announced that their products provide a hipper, happier cure for COVID-19.
In March 2021, the U.S. Food and Drug Administration (FDA) issued a warning letter to Cannafyl, a cannabis product company, because it marketed its products containing cannabidiol (CBD) as products that could prevent or cure COVID-19. These products are still available for purchase, but Cannafyl’s website now contains a disclaimer noting that its CBD products “are not intended to diagnose, treat, cure or prevent any disease.”
When the landscape for products in the food or health sectors changes, FDA often decides which products are safe for Americans. But recent developments show that markets tend to move faster than regulators, raising questions about what products FDA should leave the market free to make available to consumers.
Over the past several years, CBD, one of the compounds found in marijuana that is psychoactive but does not produce a “high,” has been used in products as varied as chocolate, mascara, and lotions.
Some studies have concluded that CBD mitigates ailments, including anxiety, insomnia, chronic pain, and addiction to substances such as nicotine and heroin. FDA, however, has warned consumers that CBD can have potentially harmful side effects, such as liver injury. At a minimum, the potential for harm from CBD seems to call for balancing costs and benefits of specific products.
Sales of these products are illegal under federal law enforced by FDA, but because FDA is not able to crack down on every sale of a food product or dietary supplement containing CBD, companies continue to sell CBD products. Furthermore, many of these products reportedly contain dangerous ingredients or are marketed falsely as cures for diseases such as COVID-19.
FDA studies which CBD products fit within the current legal framework and which pose excessive health and safety risks. The growing market for marijuana-related products, however, generates financial opportunities that create pressure on Congress and states to expand options for legal sales regardless of FDA’s findings.
In 2018, President Donald J. Trump signed the Agriculture Improvement Act of 2018 into law. Under this law, CBD products containing less than 0.3 percent tetrahydrocannabinol, the compound that produces a “high,” are no longer classified as controlled substances that are categorically illegal under federal law. Instead, the 2018 legislation authorizes FDA to regulate sale of CBD products pursuant to the Federal Food, Drug, and Cosmetic Act (FDCA).
The FDCA makes it illegal to sell food or dietary supplements that contain an “approved drug” ingredient without explicit FDA approval. When FDA approved Epidiolex, a CBD seizure medication, CBD became an approved drug ingredient. Although this action makes use of CBD in most products illegal without FDA approval, FDA has not issued a regulation drawing clear lines between approved and unapproved uses of CBD in other products.
Even though selling CBD products without FDA approval is technically illegal, companies continue to sell them in what has become a burgeoning U.S. market for CBD products. This growth in current and potential earnings creates strong financial pressures for making CBD uses lawful.
FDA has explained that its delay in issuing regulations on CBD is necessary to investigate the side effects of CBD. It takes time to conduct research that could provide FDA with enough evidence to decide whether a drug ingredient should be approved for use in food products—and, at present, research on the benefits of CBD is mixed.
FDA formed a CBD Policy Working Group in April 2019. In the ensuing year and a half, FDA has issued a few non-binding guidance documents related to CBD products—but, citing the need for additional research, no regulations.
Limits on FDA’s research budget have posed problems during the time FDA has had CBD-related issues on its docket because FDA’s resources have been strained by demands associated with the COVID-19 pandemic. Even without adopting more detailed directions on many CBD-containing products, FDA has warned some companies not to market unapproved products with assertions that the products’ CBD ingredients help treat Alzheimer’s Disease or stop cancer cell growth.
As FDA considers issues related to CBD products, some state governments are endeavoring to substitute their own rules for these products, and Congress is considering steps to reduce or remove FDA constraints. States such as California have passed CBD-related guidance that appears to contradict the FDCA’s ban on the use of CBD in food and dietary supplements. Meanwhile, other states are taking actions to crack down on improper sales of CBD products. For example, last April, New York’s attorney general sent a cease-and-desist letter to a CBD company that claimed its products would help fight COVID-19.
Some members of Congress have introduced bills to address CBD products. Two bills introduced this year in the Senate, the Hemp Access and Consumer Safety Act and the Cannabis Administration and Opportunity Act, and one in the House of Representatives, the Hemp and Hemp-Derived CBD Consumer Protection and Market Stabilization Act of 2021, would change federal regulation of CBD products. The proponents of these bills argue that there needs to be federal legislation or further FDA action to clarify the treatment of CBD products under federal law will be treated.
Yet it is equally evident that, without regulatory enforcement actions by FDA, the budding market in CBD products will flourish. Those who are producing and selling CBD products and those who seek access to them will likely endeavor to secure favorable changes in law. Even if there are sound reasons for FDA to take more time before adopting regulations for these markets, delay almost certainly will give rise to conditions that make a cautious, product-by-product determination of legality more politically difficult for FDA.
In the end, time will tell whether FDA believes in the high hopes for CBD—and, if so, how FDA will change its regulatory approach.