New York’s CBD industry at crossroads as it continues to grow

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ALBANY — New York’s CBD-related industries are experiencing some growing pains with their rapid expansion.

The market has taken off since last year, when Congress loosened restrictions for cannabidiol — the popular extract of the cannabis plant that allegedly has a variety of health benefits and doesn’t contain significant amounts of the psychoactive substance that gives users a high.

And while federal regulators have prohibited the addition of CBD to food or drink, these infused products still made their way to retail shelves all over New York.

“Food and beverages were being sold everywhere — gas stations, grocery stores … and online,” said New York Cannabis Growers and Processors Association President Allan Gandelman.

But a setback came in July, when New York City health officials and the state Department of Agriculture and Markets made a clear distinction between the legality of supplements and topical applications infused with CBD and food and beverage products.

Illegal products were supposed to be voluntarily removed from stores and major business developments, such as a CBD-infused cold brew coffee sold in grocery stores, were put on hold. Any food and beverage products with CBD that are still available for sale in New York must qualify as supplements, or they’re being sold illegally.

No fines have been issued by state regulators, who are continuing to educate businesses and performing compliance checks around the state.

Legislation approved overwhelming by state lawmakers in June would legalize CBD-infused beverages, but the measure has not yet been acted on by Gov. Andrew M. Cuomo.

The fate of the legislation, which would impose broad regulations and standards over the processing, manufacturing and sale of CBD and hemp products, is tied to an agreement between the Legislature and the Cuomo administration on future changes to the measure.

Gandelman noted that out-of-state businesses are actively lobbying against language that hinders their business interests, while New York farmers are advocating for their own additional protections.

“We’re going to see who wins,” he said.

If beverage products are allowed in New York, Gandelman estimated they could make up to 15 percent of the industry’s business, which could exceed $1 billion in sales in the state in a few years. He believes that even if adult-use recreational cannabis is legalized, the retail market will still be dwarfed by the sale of CBD products.

“There is a whole lot of money New York farmers and manufacturers will have access to,” Gandelman said.

But small businesses in the state could have a hard time entering the supplement market in New York, which has costly production standards. Additionally, out-of-state providers often have less burdensome requirements for producing supplements and have a competitive edge in New York.

The state competition issue may be resolved by labeling and testing requirements that would be imposed by the pending legislation.

It’s not clear how the  effort by federal regulators to limit the use of untested health claims of CBD products will affect demand, which has been driven largely by those touted benefits. Most anecdotal evidence to date has suggested that CBD lessens anxiety, insomnia and chronic pain, though it may not eliminate them.

“The reality of it is there isn’t enough clinic research,” CannabisLaw Group co-Chair Robert DiPisa said Monday at a cannabis conference in Albany.

“No one should make any health-related claims,” DiPisa said. “Even if you write on a product, ‘Calming’ — stay away from all of it.”

He said the federal government has been more ambiguous when it comes to how CBD should be regulated, with meaningful guidance potentially two years away if Congress doesn’t act. One potential outcome is that products with high doses of CBD will be regulated as drugs, and low dosages will be allowed in supplemental products, which are less heavily scrutinized.

“There’s still a lot of questions,” DiPisa said.

David.Lombardo@timesunion.com – 518.454.5427 – @poozer87

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