New York law sets stage for strictly regulated market for cannabinoids

By Hank Schultz contact

- Last updated on GMT

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Related tags: Hemp, hemp extracts, cannabinoids, Cbd, Regulation

New York State recently put into place regulations that govern hemp cultivation within its borders. In addition, the new law creates a regulatory framework specific to the trade in cannabinoid extracts and finished goods.

The measure was signed into law on Monday by Gov. Andrew Cuomo. Like many other plans called for the by 2018 federal Farm Bill, New York’s regulates the cultivation of hemp within the state.  

The law requires hemp processors to obtain licenses and stipulates that they must grow hemp varieties with no more that 0.3% THC levels by dry weight, which conforms to the federal definition of  industrial hemp as opposed to marijuana.

The new law also seeks to specifically regulate the trade in cannabinoid extracts and finished goods, requiring additional licenses, third party lab testing and other requirements that seem to go beyond what federal law mandates for the manufacture and sale of garden-variety dietary supplements.

Bill is toned down version of earlier attempt at regulation

Attorney Rend Al Mondhiry of the firm Amin Talati Wasserman said the law is a refined version of an even more broad reaching bill that was passed by the New York legislature in July but which was not signed by Cuomo.  That bill contained some problematical features, such as specifying that cannabinoids sold in finished goods within the state had to be sourced from New York suppliers.

In addition, at one point it specified a dosage—20 mg—of CBD that could be added to beverages.  The new law omits some of the sticking points identified in the first version, Al Mondhiry said. 

“The first law was controversial in that it very much favored New York producers of hemp.  That was just one of several problematical provisions. Some of the requirements were burdensome,” ​she said.

Al Mondhiry said her firm worked with the US Hemp Roundtable in several meetings with New York officials to craft a compromise on the bill.  She said the consensus was that the state wanted to create a comprehensively regulated marketplace for hemp.

In some ways, Al Mondhiry said the current climate on hemp mirrors what happened back in the day with the state of California and various environmental rules, such as for auto emissions.  The idea was, the federal government is not doing enough, so we’ll step up to the plate to create our own rules. 

“That’s exactly what’s happening here with hemp and CBD.  The federal government and specifically the FDA is not moving fast enough to regulate this category so the states are stepping in to do it themselves.  FDA rules are the floor here, not the ceiling,”​ she said.

Rules specific to cannabinoid trade

Attorney Marc Ullman, of counsel with the firm Rivkin Radler, said it’s significant that the new law vests authority in both the state’s Department of Agriculture as well as its Department of Health, which has some responsibilities similar to those of FDA.

“It clearly contemplates a market in cannabinoids. The potential for a well ordered marketplace appears to exist. We essentially have licensing provisions from farm to shelf, and there is a framework for the state to establish an intrastate market,” ​Ullman said.

“As always the devil is going to be in the details, especially now that FDA has expressed safety concerns,”​ he added.

Al Mondhiry concurred that the subsequent rulemaking activity will need to be closely monitored.  For example, the new law includes this provision: “The commissioner may establish and adopt official grades and standards for cannabinoid hemp, hemp extract and products derived therefrom as he or she may deem advisable, which are produced for sale in the this state.”

“What they are striving for was to set a high bar for hemp derived products. As I read it, there is quite a bit of discretion for the state to set some strict standards in rule making,” ​she said.

Click here​ to read the full text of the new law.

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