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New York’s Cannabis Control Board approved updated regulations for cannabinoid hemp, which place severe limits on THC content, despite an ongoing lawsuit in which a judge barred regulators from enforcing the limit.
While Office of Cannabis Management Executive Director Chris Alexander described the process of writing the new rules as “a thoughtful effort and approach,” several cannabinoid hemp licensees said the regulations hurt businesses and their customers.
“You’re not just affecting me … you’re affecting everyone that has access to these products,” said Jamie Galvis, founder of Brooklyn-based wellness brand Hustle + Flo, which primarily sells full-spectrum CBD products. “I don’t know what to do here, I’m at a loss.”
Board members voted to approve the rules during a Friday morning meeting, but the CCB previously passed emergency regulations for cannabinoid hemp, and businesses selling newly banned products sued in Albany Supreme Court soon after.
In July, regulators adopted emergency regulations which stipulate hemp products that include THC must have a CBD-THC ratio of at least 15-1, and a maximum of 10 milligrams of THC per package. Edible hemp products may only contain 1 milligram of THC per serving. The rules also ban intoxicating hemp-derived cannabinoids such as Delta-8 THC, THC-A and THC-O.
Before regulators passed emergency regulations, companies that sell hemp-derived Delta-9 THC enjoyed some pretty stark benefits: they don’t pay the high regulatory costs that companies operating on legal state marijuana markets do, and they’re allowed to sell across state lines.
In court, plaintiffs, including North Fork Distribution, Inc. (Cycling Frog); Sarene Craft Beer Distributors, LLC; Hemp Beverage Alliance, Inc.; One Stop Brew Shop, LLC, argued that the emergency regulations violate the MRTA. They argue the CCB acted in an “arbitrary and capricious” manner when they approved the rules, and failed to identify an “emergency” to justify the quickly enacted rules.
On Nov. 13, state Supreme Court Judge Thomas Marcelle issued an injunction barring regulators from enforcing the emergency regulations. After conferring with two other judges, Marcelle said the OCM’s justification for imposing emergency regulations fell short. Marcelle also seemed sympathetic in his decision to plaintiffs’ claim that the emergency regulations were imposed for business, rather than health, concerns.
“Plaintiffs posit that respondents adopted the Emergency Regulations not for public health motives, but to protect and advantage New York cannabis vendors – which has the altogether pleasant externality of enhancing tax revenue,” Marcelle wrote in the decision. “Respondents are less than bashful about this. They admit that petitioners’ intoxicating cannabinoid hemp products undermine the adult-use market, which they license.”
In an interview after Friday’s CCB meeting, attorney Joshua Bauchner – who serves as chair of the cannabis and psychedelics group at Mandelbaum Barrett PC – told NY Cannabis Insider that the OCM can likely now enforce the rules, despite the court injunction. That’s because the injunction covers the emergency rules, but now they’re official regulations.
However, Bauchner said it’s likely hemp companies will challenge the regulations in court on the grounds that they amount to a government body banning a lawful product and businesses that sell it.
“I think there’s gonna be a lot of constitutional challenges to what the state’s trying to do here, and it just smacks of government overreach,” Bauchner said.
During Friday’s CCB meeting, board members approved registration renewals for nine of New York’s 11 medical cannabis Registered Organizations. The panel also approved new fees that cannabis testing laboratories will pay to regulators: either 1% of each lab’s gross annual revenue, or $1,000 (whichever is higher).
Presenting an update on legal cannabis sales, OCM Director of Policy John Kagia said retailers have sold just under $109 million worth of legal cannabis products to date, with $23 million in products sold so far in 2023′s fourth quarter.
Additionally, Kagia said Cannabis Growers Showcase events have generated $3.4 million in revenue since the events launched in August.
An agenda for Friday’s meeting said the CCB would vote on whether to approve a settlement in a lawsuit against New York’s Conditional Adult-Use Retail Dispensary program. An ongoing injunction stemming from this lawsuit is currently preventing hundreds of CAURD dispensaries from opening.
However, at the beginning of the meeting, CCB Chair Tremaine Wright removed the item from the agenda.
Responding to an inquiry about the possible settlement, OCM Executive Director Chris Alexander said the office is still working toward a solution.
“We continue to work diligently to resolve the pending litigation and ensure continued development of the most equitable cannabis market in the country. We are hopeful that we will have more to share soon,” Alexander said.