In the Weeds: New and Planned Standards for Hemp Seed, CBD; NY Subways Ban Ads; Colorado Steps Up Enforcement

December 1, 2021
Newsworthy Highlights

ASTM International Sets Quality Standards for Sampling Hemp Seed

ASTM International, a nonprofit organization that sets voluntary standards for a variety of industries, recently approved new quality standards for sampling hemp seed intended for human consumption. ASTM’s new guidance aims to help manufacturers and farmers who grow and store hemp seed to be used in consumable products. Under these new standards, hemp seed must be tested for THC levels, as well as for moisture and microbial levels.

A representative for ASTM noted that, “[i]f accurate sampling is done and remediation — if needed — can be undertaken early, food waste may be avoided.” ASTM International announced that the new standards will be published as D8417. The standards were developed by ASTM Committee D37, formed in 2017 “to develop standards for cannabis, its products and processes.” More information about Committee D37 is available on ASTM’s website.

Brooklyn CBD Retailer Alleges Payment Processor Wrongfully Locked Accounts

In a complaint filed in the Eastern District of New York (1:21-cv-05920), a Brooklyn-based CBD retailer alleged that one of the largest online third-party payment processing platforms wrongfully restricted the retailer’s accounts on the platform. According to the complaint, the payment platform accused the retailer of selling “narcotics, steroids, drug paraphernalia, certain controlled substances, or other products that present a risk to consumer safety,” in violation of the platform’s terms of service. The payment platform also allegedly placed a hold on approximately $9,000 of retailer funds, pending an investigation into the retailer’s practices, and retained nearly $4,000 of the retailer’s funds to finance its investigation.

The retailer argued that the payment platform misinterpreted the 2018 Farm Bill, which the retailer said exempts CBD from classification as a narcotic. The retailer also claimed that the payment platform seized its funds without due process. The payment platform has not yet submitted any filings in the case.

National Industrial Hemp Plans CBD Standards Pilot Program

On Nov. 15, 2021, the National Industrial Hemp Council (NIHC) announced plans to develop a pilot program to establish standards for product testing and labeling protocols for CBD products. NIHC President and CEO Patrick Atagi pointed to the current lack of federal regulations to guide manufacturers as the impetus for the program’s creation, noting that, “[w]ithout any guidance from the [Food and Drug Administration] thus far [on CBD], the NIHC is stepping up to develop our own testing standards and labeling protocols that we believe will enhance consumer safety and protect the consumer’s right to know.”

Pilot program participants who comply with the NIHC’s guidelines for ingredient accuracy and product labeling will be able to advertise that their products are NIHC-approved. Atagi noted that “we believe [this program] is going to strengthen consumer confidence, promote accuracy in labeling and ultimately, protect the brand of hemp.” NIHC guidelines do not change FDA’s current position on CBD products.   

Grassroots Federal/State Legislative Highlights

NY Subways Prohibit Marijuana and Mushroom Ads. In November 2021, the New York Metropolitan Transportation Authority (MTA) updated its advertising policy to prohibit certain categories of advertising, notably including cannabis and cannabis-related products. The update is unsurprising, however, as a recent Senate bill legalizing marijuana in the state explicitly stipulated that regulators must prohibit marijuana advertising “in public transit vehicles and stations.”

According to the updated policy, MTA will not accept any advertising proposals that promote “tobacco, nicotine, or any tobacco-related or nicotine-related product; any alcohol product; cannabis or any cannabis-related product; or hallucinogenic mushrooms or hallucinogenic mushroom-related product” for display in or on any MTA property. Other categories of prohibited advertising include promotion or opposition of a political party or proposed legislation, matters of public policy or religious policy, and promotion of unlawful or illegal goods or activities.

South Dakota Supreme Court Nixes Adult-Use Marijuana. In November 2020, a majority of South Dakota voters approved Initiated Constitutional Amendment A, which set forth a process to legalize, regulate and tax marijuana. The amendment also required the state legislature to pass laws regarding hemp and pass laws ensuring access to marijuana for medical use. Despite the results of such vote, the Supreme Court of South Dakota has declared the amendment invalid, as a violation of the South Dakota Constitution. Article XXIII, §1, of the state constitution provides, in relevant part, that “no proposed amendment may embrace more than one subject” and, “[i]f more than one amendment is submitted at the same election, each amendment shall be so prepared and distinguished that it can be voted upon separately.”

The court opined that “[i]t is clear that Amendment A contains provisions embracing at least three separate subjects, each with distinct objects or purposes.” According to the court, those three separate subjects are (1) regulation of marijuana for all individuals at least 21 years of age, (2) laws ensuring access to medical marijuana, and (3) regulation of hemp. The court suggested that the drafters of Amendment A “folded the additional subjects of hemp and medical marijuana into this single amendment to aggregate votes and increase the chances for passage of the provisions legalizing and regulating recreational marijuana.”

Pennsylvania Marijuana Regulators Order Review of Vape Product Ingredients. According to news sources, Pennsylvania medical marijuana regulators are ordering an immediate review of all “vaporized medical marijuana products containing additional ingredients.” According to the Nov. 26, 2021, article, an email provided to by the Pennsylvania Department of Health stated that growers and processors were required to submit by Nov. 30, 2021, samples of vape products containing “anything that alters the dosage level, color, appearance, smell, taste, effect or weight of the medical marijuana.” The email further states, “If you are producing any vaporized medical marijuana products that contain additional ingredients that are not approved by the [U.S. Food and Drug Administration] for inhalation, you MUST recall these products pursuant to 28 Pa. Code 1151.42(c).” Failure to comply “may result in the Department suspending the sale of your entire line of vaporized products.”

Colorado Steps Up Enforcement on Medical Marijuana Sales. On Nov. 9, 2021, the Colorado Marijuana Enforcement Division announced new rules to limit the transfer of cannabis and further restrict advertising. Under the new rules, medical marijuana patients will now be limited to 2 ounces of flower and 8 grams of concentrate. Medical marijuana patients between the ages of 18 and 20 will be limited to 2 grams of concentrate per day unless a physician exemption recommendation applies. Dispensaries must ensure compliance with the new rule by limiting or refusing to fill patient requests flagged as exceeding the daily limit.

The new rules will also require dispensaries to provide, to all patients buying marijuana concentrate, pamphlets summarizing appropriate serving size, how to consume it and negative consequences of misuse. The warning for concentrates will be required for both medical and recreational users of marijuana. Finally, there will be a complete prohibition on any product marketing to persons under 21, as well as a new requirement to disclose on all advertising materials the risks of overconsumption of concentrates.

Colorado’s new rules reflect the state’s continued struggle to appease citizens who are concerned cannabis is too unregulated; however, dispensaries may view the new regulations as an additional burden to doing business and may view these new warnings as hampering product sales.

Investments and Transactions Highlights

On Nov. 22, 2021, Ayr Wellness Inc., a vertically integrated multistate cannabis operator, announced that it entered into an agreement to acquire Gentle Ventures LLC, doing business as Dispensary 33, and certain of its affiliates that collectively own and operate two licensed retail dispensaries in Chicago, Illinois. According to the announcement, Ayr will acquire equity interests in Dispensary 33. The purchase price is expected to consist of $55 million up front, including $12 million of cash, $3 million of sellers’ notes and $40 million of stock. The transaction is subject to customary closing conditions and regulatory approvals.

“In the Weeds” is McGuireWoods’ biweekly ounce of highlights in the budding cannabis, hemp and CBD industries. For more information, see our newsletter archive, our Edible Bites podcast series (available on Apple and Spotify), or visit our Cannabis, Hemp & CBD practice.