Quarterly Policy Update: Cannabis Rescheduling, California Legislation Updates, and New York Market Momentum

Nabis is proud to continue drawing on our knowledge and resources to contribute to a better cannabis industry. Whether in California, New York, or at the federal level, we are excited to join the chorus of industry leaders and colleagues to advocate for progressive policies that advance our industry as a whole. In this edition of our Quarterly Policy Update, we highlight some of the major updates coming out of Q3 2023, including critical news from the U.S. Department of Health and Human Services (HHS), key legislative and regulatory changes in California, and momentum in New York’s emerging cannabis market. 

Federal Policy Updates

Federal Momentum: HHS Recommends Cannabis Move to Schedule III & SAFE Banking Passes Committee

We have seen a lot of momentum around easing federal restrictions on cannabis in the last few months. August marked a major milestone in the journey to federal cannabis legalization when the U.S. Department of Health and Human Services (HHS) announced a recommendation to the Drug Enforcement Administration (DEA) that cannabis be moved to Schedule III under the Controlled Substances Act. While a substantial rule-making process lies ahead of the plant’s formal rescheduling, this announcement marks a pivotal change in the federal government's stance on cannabis and could exert a noteworthy influence on future market dynamics.

Additionally, this year’s federal legislation to provide access to banking services for legal cannabis businesses - the Secure and Fair Enforcement Regulation (SAFER) Banking Act - passed the Senate Banking Committee with a bipartisan vote of 14-9. This marks the first time such legislation has been considered by the Senate and demonstrates increasing bipartisan support for cannabis operators at the federal level. 

Congressional Hemp RFI - Nabis Weighs In

Earlier this summer, Congress members issued a Request for Information (RFI) regarding the possible federal regulation of hemp-derived CBD and other cannabinoid products. This inquiry arose in part due to concerns around the proliferation of intoxicating hemp products being sold outside of regulated cannabis markets. Nabis submitted a comprehensive response to the RFI, leveraging our extensive experience to emphasize the need for stringent health and safety standards, rigorous testing protocols, proper age-gating of intoxicating products, and the importance of third-party quality assurance checks in the supply chain.

California Policy Updates

Legislature Adjourns for 2023; Key Bills to Watch

After an eventful legislative season, California’s Legislature adjourned for the year on September 14. While this year saw many cannabis bills held for further consideration when the Legislature reconvenes next year, several notable bills that Nabis supported such as SB 51 (Bradford), which extends the ability for social equity retailers to obtain provisional licenses, and SB 540 (Laird), which establishes sensible consumer education and labeling standards for cannabis, passed with bipartisan support.

Unfortunately, AB 1207 (Irwin), a bill seeking to add severe restrictions to the way legal cannabis businesses can label and market their products, narrowly passed the Legislature despite intense advocacy from the industry. If signed by Governor Newsom, this bill will have a major impact on licensed operators with broad prohibitions on the use of humans, animals, vegetables, and fruits. We strongly urge licensees, brands, and all passionate members of the cannabis community to make your voices heard and advocate for the Governor to veto AB 1207!

Updated Prop 65 Language - Effective October 1

Last year, California’s Office of Administrative Law (OAL) finalized updated regulations concerning Prop 65 “Safe Harbor” language. These revisions include the requirement for specific, additional language on cannabis products containing delta-9-THC. While these regulations went into effect on October 1, 2022, there was a one-year “phase-in” date, meaning products manufactured on or after October 1, 2023 will require this new language. 

Nabis issued a memo to our brand partners in early August regarding this impending change and we are committed to collaborating closely with our brand and retail partners to facilitate a seamless transition to the updated Prop 65 standard.

Increased Lab Compliance 

In light of recent reports around “potency inflation” in cannabis products, the DCC put out a notice to cannabis testing laboratories that the Department will begin increasing inspections and auditing of results at lab facilities and underscoring the importance of accurate results. California companies should be prepared for potential relabeling or recall requests from the DCC. Nabis is prepared to work with our brand, laboratory, and retail partners to ensure smooth communication and timely responses to any potential impacts stemming from this announcement. 

New York Policy Updates

Adult-Use Regulations Finalized; Applications Live in October 

On September 12, New York’s Cannabis Control Board (CCB) adopted the final draft of its adult-use regulations, marking a significant step in opening up the state’s slow-rolling adult-use market. Simultaneously, the Office of Cannabis Management (OCM) declared that adult-use applications would become available in early October, providing much-anticipated clarity to the New York cannabis community. Here at Nabis, we're optimistic that this signals the start of a thriving and easily accessible legal cannabis market across the state! 

CAURD Court Troubles

In less optimistic developments, New York's conditional adult-use retail (CAURD) program has ground to a halt after a tumultuous month of legal battles. This has left many prospective retailers, some on the very brink of opening their doors, at a standstill while the CAURD program is entangled in ongoing court proceedings. We wholeheartedly encourage our colleagues in the New York cannabis community to actively engage with organizations such as the Cannabis Association of New York (CANY) and local advocacy groups to help ensure that New York’s market rollout is smooth, open and accessible. 

This was a dynamic quarter in the world of cannabis policy and regulation, with long-awaited momentum from the federal government, impactful policy changes in California, and major regulatory news out of New York. As we enter what is sure to be a busy fall season, Nabis will continue to advocate for a strong, healthy, and equitable legal cannabis industry and lead with allies to make an impact. We urge all cannabis community members to stay engaged, advocate for rational policies, and collaborate to maintain an accessible and thriving market. Together, we can shape a brighter future for cannabis policy.