Marijuana

Will New York’s Cannabis Law Create Sweeping Changes For Its Hemp Industry?

Although the DOH is accepting applications for cannabinoid hemp processors, retail licenses, and distributor permits, the state agency has yet to adopt and publish the aforementioned rules in the New York State Register.

By  
on

On March 31, Gov. Andrew Cuomo signed into law the much-anticipated Marijuana Regulation and Taxation Act (MRTA). What isn’t obvious from the title of this new law, however, is that it includes provisions that may change how the state will eventually regulate its hemp industry.

The MRTA is the first state law that proposes to centralize the regulation of cannabis operators, including hemp and marijuana stakeholders. The MRTA tasked the Cannabis Control Board (CCB) with implementing rules and regulations for “cannabinoid hemp” and marijuana which will eventually be administered by the Office of Cannabis Management (OCM).

This is significant because just a year ago, the state enacted A08977, which instructed New York’s State Department of Health (DOH) to develop the state’s Cannabinoid Hemp Program, which was designed to regulate the processing, manufacturing, and sale of hemp extract and cannabinoid hemp products (finished hemp-derived products used for human consumption, with the exception of cosmetics) in the state.

Launched in November 2020, that program requires processors, manufacturers, distributors, and retailers of these cannabinoid hemp products to first obtain a license from the DOH and establishes quality control standards in the form of proposed rules. Although the DOH is accepting applications for cannabinoid hemp processors, retail licenses, and distributor permits, the state agency has yet to adopt and publish the aforementioned rules in the New York State Register. This means that no state hemp processor, distributor, or retailer is formally operating under these new regulations –- the only lawful and formally regulated operations in the state are currently limited to activities pursuant to research partnership agreements with the New York Department of Agriculture and Markets.

Nevertheless, the MRTA provides that existing rules, regulations, and determinations made by the DOH that pertain to cannabinoid hemp at the time the CCB and the OCM take over the regulation of these products would remain in place until this new regulatory body adopts or repeals them. Therefore, it remains to be seen if the DOH will opt to finalize the rule-making process or if it will defer to the CCB and the OCM in deciding whether to adopt the rules in their current form, or a version thereof, in the months to come. We anticipate the CCB will release regulations in the fall.

What is apparent from reading the MRTA is that Article 5, which contains provisions governing the regulation of cannabinoid hemp products and hemp extract, generally aligns with the rules in that it contains similar definitions and mandates that cannabinoid hemp processors and retailers secure a license to lawfully enter this market. That said, Article 5 also contains language that suggests the CCB may impose additional requirements on the hemp industry. For example, the MRTA stipulates that wholesale activities will not be authorized without obtaining an appropriate registration or permit. It also provides that the CCB may issue “special use permits,” which are temporary permits for carrying on any activities related to cannabinoid hemp, hemp extract, and products derived from hemp that are licensed by the agency.

It is also worth pointing out that the MRTA contains licensing requirements and prohibitions that may eventually apply to all hemp-related activities and could hinder the ability of hemp companies that are freely operating in the state to lawfully operate upon the adoption of the CCB and the OCM’s regulations. This is because the licensing process highlighted in the MRTA provides for a “good moral character criteria” that would likely extend disqualify these companies from securing a license. Moreover, the MRTA expressly prohibits adult-use vertically integrated operators and generally prevents ownership of multiple licenses by entities owned by the same persons (including minority owners). So, given the spirit of the law, the CCB may likely extend this prohibition to hemp operators.

Sponsored

So, while it is impossible to determine to what extent the MRTA and its upcoming regulations will impact the hemp industry, one thing is certain: hemp stakeholders not currently operating under a New York Department of Agriculture and Markets research partnership agreement should hold off a bit longer before they venture into New York’s cannabinoid hemp market.  Showing restraint will not only give hemp companies the ability to thoroughly assess the legality of and the risks associated with this market but will also preserve their ability to operate therein lawfully and successfully.

Nathalie practices out of Harris Bricken’s Portland office and focuses on the regulatory framework of hemp-derived CBD (“hemp CBD”) products. She is an authority on FDA enforcement, Food, Drug & Cosmetic Act and other laws and regulations surrounding hemp and hemp CBD products. She also advises domestic and international clients on the sale, distribution, marketing, labeling, importation and exportation of these products. Nathalie frequently speaks on these issues and has made national media appearances, including on NPR’s Marketplace. For two consecutive years, Nathalie has been selected as a “Rising Star” by Super Lawyers Magazine, an honor bestowed on only 2.5% of eligible Oregon attorneys.  Nathalie is also a regular contributor to her firm’s Canna Law Blog.

Sponsored

Topics

, , ,