Special Report

Cannabis and the Legal Industry: New Rules, New Risks, New Opportunities

The state-by-state legalization of marijuana for medical and recreational use has created a complicated legal landscape—and with it new demands for lawyers to responsibly advise cannabis clients and companies in adjacent industries. This special report features Law.com's in-depth coverage of emerging legal issues, key regulatory developments, and the lawyers who are helping to shape a new industry.

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CBD OilOn July 1, 2019, the New York City Department of Health and Mental Hygiene’s (Department of Health) ban on the sale of food and beverages containing cannabidiol (CBD) officially went into effect, sending retailers and restaurants that market CBD food products scrambling. Before the ban, bodegas and coffee shops throughout the city had success marketing lattes, teas, gummies, and other products containing CBD. But in December 2018, the federal Food and Drug Administration (FDA) released a statement explaining that despite the passage of the 2018 Farm Bill and legalization of hemp, the addition of CBD to food and drinks products remains illegal. The FDA has undertaken a review of the status of CBD and held a public comment hearing in May 2019 as an initial step to developing regulations regarding the addition of CBD to food products. But the FDA regulations may not be released for years, and some local authorities like the New York City Department of Health are not waiting and have begun to crack down on the sale of food and beverages containing CBD.

CBD is one of the many compounds found in both hemp and marijuana. The CBD products being sold on the market today claim to be largely derived from hemp, which was removed from the Controlled Substances Act as a Schedule I substance in December 2018 as part of the passage of the 2018 Farm Bill. Although CBD is not psychoactive and does not produce a high, it continues to occupy an uncertain legal space despite the legalization of hemp. Many tout the therapeutic health benefits of CBD in treating anxiety, pain, inflammation, and other conditions, which can still be purchased in tinctures or lotions throughout New York City. But until CBD is deemed safe for human consumption as a food additive, the city’s health department has announced that restaurants and retailers are prohibited from selling food or drink products containing CBD. News outlets are reporting that inspectors from the New York City Department of Health have been embargoing products that contain CBD and advising restaurants to cease selling products that contain it. Fortunately, for retailers, the agency will not issue violations or fines to those establishments offering food or drink containing CBD until Oct. 1, 2019. But many establishments are stuck with inventory of CBD products that they no longer can legally sell.

Not all of the city’s lawmakers are on board with the ban. Some New York City Councilmembers, including City Council Speaker Corey Johnson, have sent a letter to the Department of Health requesting an official explanation of its stance on CBD, a detailed accounting of how the agency reached its decision, and an explanation of why the decision was made without any public hearing. The Health Department has said simply that it was abiding by federal government guidelines, citing the FDA’s explanation that it is unlawful to add CBD to food or drink. Notwithstanding the New York City ban, on June 20, 2019 the New York state legislature passed legislation concerning the growth of industrial hemp and the regulation of hemp extract. The legislation has not been signed by the Governor and is yet to take effect. The bill specifically addresses the addition of CBD to beverages, but does not explicitly address the sale of CBD-infused foods within the state.

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