As part of Governor Andrew Cuomo’s 2021 State of the State address, he announced his and the New York Department of Health’s proposal to legalize adult-use cannabis, the latest step in New York’s efforts to legitimize and regulate the burgeoning cannabis, hemp and hemp-derived cannabinoid industries. The proposal is estimated to create 60,000 new jobs and generate $300 million in tax revenue. The newly-formed Office of Cannabis Management would oversee all cannabis-related programs, including adult use, medical and hemp.

Until recently, consumers faced a multitude of concerns when looking to purchase cannabidiol or CBD, by far the most popular and commercial cannabinoid. Products labeled as CBD would not in fact contain the ingredient, nor were manufacturers required to adhere to any particular packaging regulations or even have to test their products before hitting the market. Signed into effect in late 2019, the New York Hemp Extract Law sought to remedy these consumer protection concerns by requiring hemp processors and retailers to obtain licenses, and establishing basic manufacturing, packaging, and testing best-practices.

Since the 2018 Farm Bill federally legalized hemp containing less than 0.3 percent THC (the psychotropic compound found in cannabis), the U.S. CBD industry has proliferated. In fact it’s projected to generate more than $20 billion in sales by 2024 across personal care, beauty, food, beverage and pharmaceutical categories. However, corporate policies against CBD still abound, and consumer brands often face basic operational challenges such as a lack of financing and bans on advertising.

CEW Beauty News spoke with two executives from New York-based CBD beauty and wellness brands, Sarah Mirsini, Founder, Mask Skincare, and Jena Min, Founder, VERBÖDEN Beautyfood, about how the new cannabis proposal may affect their businesses, and their thoughts on what more government oversight and regulation in their industry means.

BN: What was your experience like running your brand before any state or federal regulation was in place?
SM: In the beginning it was more challenging because we started before any FDA regulation, so it was like the wild, wild west. You had people try to sell you synthetic CBD during the whole boom back in 2018. Everyone wanted to get on the bandwagon. You weren’t sure if you were getting quality CBD, or the right prices from vendors, so for us in the beginning it was establishing what it cost to grow, how many acres would my brand require to grow? How are they sourcing everything? We wanted to provide high-quality CBD to a mainstream audience and educate them on the subject. So, it was a matter of finding the right producer and the right lab that could create something stable, and knowing I had something safe and reliable to work with. We launched Mask Skincare in April 2019. But it was definitely a bit confusing and frustrating at the start because the CBD industry was so new, and people didn’t quite know how to proceed. It has stabilized a lot over the past year and a half in terms of separating out the people and companies who want to ride the trend versus the people who want to be in the industry for long-term growth.

BN: What effect will the new state cannabis proposal have on your business operations?
SM: I think it will make it easier for both THC and CBD brands to operate. Legalizing cannabis will help legitimize it, and hopefully shift public opinion. That’s the positive side because people are now scared and weary because it’s illegal. But I hope that the state legalizes it for the right reasons, not just because it economically benefits them. I think that they should have reasonable prices so anyone who needs this for health benefits can afford it and access it. It should be considered health care. The state should have experts in the field advising them so they can make effective and informed laws and regulations. I don’t think people in the government right now know a lot about cannabis. They should have medical marijuana doctors from L.A., or lab formulators that can come in and explain what THC can do medically; they need to be educated themselves. There also needs to be an educational push on this from the government. Perhaps a portal you can log onto after you buy your first product where there are videos, FAQ’s, things like that.

BN: What are your thoughts on having more government oversight on your industry?
SM: I think it’s interesting that New York State started to take this more seriously after we’ve had such a big hit from COVID. The Governor has stated that the cannabis legislation would create more than 60,000 new jobs, bring in $3.5 billion in economic activity, and a couple hundred million in tax revenue. Cannabis was looked down on for so long but now they see it’s becoming trendy worldwide—some people even prefer it over pharma—and now they want a piece of the pie. Now they want to come in and tax us 50 percent. I think it’s great that they want to legalize it because you see the benefits from cancer patients to kids with epileptic seizures, and beyond. But now that they need the revenue, I’m a bit worried about how they’re going to tax us. We worked for years to destigmatize cannabis and create a robust industry. For the government to step in now…..

BN: What main challenges have you found with running a CBD business?
SM: The CBD industry is very small, especially with the brands that take it seriously. We’re all frustrated by the players who just want to be in it for trends, and we’re all frustrated that we can’t advertise on certain social media platforms. We’ve been restrained so much in terms of marketing and advertising. There’s not a bank that will work with a CBD company right now. A lot of us are on the Square pilot program, so we can take payment for the products that we sell. But a lot of CBD brands operate on cash, and that’s just not doable for the long run. So if everyone is taking advantage of this and taking the tax money, the banks should have us as customers. A lot of CBD brands went under because you can’t advertise on Instagram or Facebook, the two biggest platforms for revenue.

BN: Will New York State’s new regulations present new opportunities for the industry?
SM: As long as the state is genuinely interested in doing this for the right reasons I don’t see why it shouldn’t succeed, but I think the early steps are crucial in terms of education. Creating jobs that are honest, supporting farmers that you know grow responsibly, and doing things right from the ground up – no pun intended. It shouldn’t be rushed into for the tax revenue. That’s how they’ll fail. Bring in the field experts and shadow them for a few months. Start with the farmers and how they extract the seeds, then move onto the lab and the formulators. Go out in the market and see how the industry and the consumers are reacting to the product.

New York State now requires that CBD businesses have a license to sell either online or in retail. The Department of Health opened up a registration to apply for a cannabinoid retailer license and a distributor permit. I’m worried about how much they going to regulate the industry now. CBD never required a license before and now they want to restrict that. If you don’t pass the licensing process, will they shut you down? Are they going to charge you for the license? Are they increasing your taxes? These are all questions people in this industry are wondering about.

BN: What was your experience like running your brand before any state or federal regulation was in place?
JM: We had our basis in the medicinal and the medical. I applied for the medical cannabis program when it first legalized in New York back in 2014. We then pivoted to focus on CBD two years later. The brand went through many evolutions before we officially launched VERBÖDEN Beautyfood in 2018, which included pop-ups, live seminars, retail stores, beauty shops, basically anywhere anyone would be interested in listening to me talking about CBD. It was only focused on education, and from there by meeting and talking to potential consumers we developed a product line with topicals, food and tinctures.

In regard to regulations, when we started there were really none. There was almost nothing on the market then because no one knew what CBD even was and when I tried to tout the benefits of it, and explain that there was no THC – or very little – but most people asked, well what’s the point then? Everyone knew cannabis as containing THC, and they didn’t focus on the medicinal benefits of all the other cannabinoids.

We were ahead of the game in terms of the packaging and labeling of our products, our testing and the education we provided customers. None of the products were even required to have testing to be on the market, and we’ve been testing from the get-go. That’s the only way you’re going to know what’s in it. We had a lot of weary consumers come to us and question how much CBD was in our products, and I’d just show them our lab tests. All of our products are very clearly labelled with how much CBD is in each serving, that the product is organic and full spectrum. At that point everyone just called it CBD, and no one really knew the differences between broad and full spectrum. CBD was just CBD back then.

BN: What effect will the new state cannabis and hemp regulations have on your industry?
JM: I really think that the new Hemp Extract Law is a good thing as a whole for the industry, and especially with regards to consumer protection. I’ve been waiting for this. They’re talking about clamping down on people that don’t comply with labeling. I mean, that’s pretty basic, having a very transparent label telling the customer not only what the ingredients are, but what the dosage is, what they’re taking, and what the effect will be.

In terms of how it will affect the industry as a whole, I think that more regulation is a good thing because there was such a lack of it. I think that since New York is so late to the game they can see the missteps of all the other states, especially in regard to the social equity part of it. They do have a great opportunity to create a model framework for other states.

BN: What effect will the new state cannabis and hemp regulations have on your business operations?
JM: For our business specifically, it’s not going to affect us that much because we’ve already been complying with so many of the new changes in the regulation. There’s some permits we’ll have to apply for and the new increase in taxes for certain areas like food & beverage. But with the industry as a whole, there will be a lot of changes and a lot of companies who are not able to comply will either go out of business or will have to adjust.

BN: What are your thoughts on having more government oversight on your industry?
JM: I don’t wholly trust the governor’s office only because I know first-hand just from going through the whole RFP process that he’s not a friend to the industry in terms of cannabis as a medicine. I do understand that some people will be weary of adult-use cannabis, but in terms of the medicine side how can anyone be against that? So that is the area I’m hyper-vigilant and a little critical about – where are these tax revenues exactly going to be focused on? They talk about social equity and about justice and undoing the harms that were done by racial bias. But at the same time, how are these laws going to be implemented? Is this going to involve community organizations? It remains to be seen.

BN: Will New York State’s new regulations present new opportunities for the industry?
JM: I think New York is trying to give themselves the upper hand in terms of NY-grown, processed and manufactured but that’s a double-edged sword. That goes into protectionism, and a bias against out-of-state manufacturers. There may be laws in place to prevent that from happening. But on the branding side, if you’re focused on creating regulations that promote high-quality products then naturally NY will become a front-runner and gain a great reputation.