In a significant win for the burgeoning industry, the New York Supreme Court ordered yesterday a preliminary injunction against the emergency measures that abruptly halted the sale of hemp-derived THC-infused products in August, acknowledging that — caught between balancing the equities of regulators and petitioners — that the latter party should be favored because an injunction “would stave off the shuttering of their businesses.”
The issue came to the fore this summer, when New York’s heavy-handed approach towards regulating the newly opened legal cannabis market inspired the wrath and frustration of beverage and edibles makers following the filing of emergency regulations by the state. That sparked a legal response from Washington State-based cannabinoid seltzer brand Cycling Frog and trade group the Hemp Beverage Alliance, asking the courts for an injunction of the “ill-conceived emergency regulation.”
In his ruling on Thursday, Supreme Court Justice Thomas Marcelle didn’t dispute the ultimate authority of New York’s Cannabis Control Board and Office of Cannabis Management to regulate products that contain hemp-derived cannabinoids, but pointedly noted that, “at least until the current emergency regulations at issue here,” those bodies had “decided not to directly regulate THC levels of hemp infused products” when they began showing up in New York around 2021.
That changed (“for reasons unexplained,” Justice Marcelle wrote) in July when the Board approved Emergency Cannabinoid Hemp Regulations under the guise of protecting the public, and young children, from products they deemed “ambiguous labeling that puts consumers at risk of overconsumption.” That stance has been challenged in the suit, which contends that the 1 1/2 page Emergency Justification filed by the Board failed to support its position that an emergency existed and lacked specific examples of its purported assertions.
Justice Marcelle was unmoved; in his decision, he called the petitioners’ arguments against the Emergency Justification “compelling,” affirming the lack of factual support and quipping that the document’s “parade of horribles that await children from petitioner’s products lack specific recital of any actual facts upon which such concerns are based.”
The Board issued further evidence in response after the Emergency Justification, a move that Justice Marcelle appeared skeptical to even consider and to which its arguments had little effect. Instead, he sided with petitioners, agreeing that irreparable injury had occurred with regard to the loss of business and uncertain future, particularly those who had taken financial risks to enter the market early.
To that point, Justice Marcelle’s decision notably includes an admission by state regulators that intoxicating hemp products could undermine the adult-use cannabis market that they license and control, which petitioners have claimed was one of the motives behind the emergency move.
“We’re ecstatic. It’s a monumental victory,” Cycling Frog partner and head of brand Jason Peterson told BevNET on Friday morning. “It sets a precedent that the states that are regulating these products need to do so in a way that is fair and in compliance with state and federal laws.”
For now, Cycling Frog and other hemp-based beverage brands can return to store shelves in New York as the state’s regulatory board decides how it wants to move forward with its rulemaking.
The injunction does provide some optimism as to how the hemp beverage industry can challenge regulation of low-potency, hemp-based beverages in other states, Peterson pointed out.
Currently, Cycling Frog can’t sell its products in the same locations where alcohol is sold in its home state or in many other recreational states like Colorado, California or Oregon.
“New York was a test case,” Peterson said. “What you’re seeing now is this hemp industry that has enough size and clout to be able to push back and say look what we’re doing is federally legal and you can’t stop us.”