NYC Restaurants and Bars Facing a CBD Crackdown

New York City Department of Health has started enforcement activity
against restaurants and bars using CBD as a food additive. Through
July 1, 2019, investigators will visit establishments and give warnings.
After July 1, fines will be imposed up to $650. During this week’s
crackdown, investigators have asked the restaurants and bars to
return illegal CBD edibles to their distributor or discard them, and to
refrain from future purchases and sales at their establishments (thus
the term “embargo” for this enforcement policy). While only 5 eateries
received a visit this week, enforcement activity will continue and
hundreds of establishments will likely be affected. Other cities and
counties have hinted they will begin their own enforcement activity at
the local level.

While the World Health Organization has declared CBD to be safe for
human consumption, the U.S. federal government has not yet done so.
We may all know that it is safe and will eventually be officially
declared safe by the FDA, we are in this limbo period waiting for that
to happen. It will likely be 18-24 months. While some government
agencies have announced that they will not be strictly enforcing
cannabis laws, the agencies responsible for public health are making it
clear that they have no such sentiment. Until CBD has been tested and
declared safe for human consumption, and we know the potential
dangers and side effects, businesses cannot use it and sell it to the
general public.

CBD has no labeling standards or regulated dosage guidelines. When
you buy an entrée or beverage at a restaurant (or an edible at a retail
store), you generally don’t know how much they’ve put in your food
and drink. Drug interactions and side effects of CBD are not full
known. Until more reliable scientific information is collected, the

regulatory agencies are deeming it “not yet known to be safe” for
human consumption. While an individual may do his or her own
research and make personal decisions about CBD use, we have a
higher responsibility when it comes to retail businesses that sell to the
general public. While some portion of the public are quite
knowledgeable about CBD, a larger portion is unwary. They rely on the
assumption that food they buy is safe to eat or it wouldn’t be on the
market.

A restaurant or bar can sell its food and beverage and permit
customers to bring and add their own CBD. They just can’t add it into
the products they prepare and serve. Since CBD is itself legal to sell
and purchase, there is a possible loophole where an establishment
could sell CBD at its front counter for customers to buy and add
themselves.

I suspect that profit will still prevail for many business owners. While
there is a risk of getting caught and fined for CBD edibles, the business
may make so much money from CBD infused food and beverage sales,
the fines will simply be viewed as a cost of doing business. Say a NYC
business makes $500-$2,000 per day on its CBD menu items.
Multiply that by 360 days and the cost f a $150-$650 fine is dwarfed.
It makes financial sense to continue to sell as long as it can, even with
the occasional fine. The discussion may change if the penalties include
closing down the business, but so far that is not an outcome. However,
if businesses flagrantly ignore the rules and are the subject of
persistent violations, I suspect agencies will have stricter enforcement
and businesses may be subject to loss of licenses and closure as being
unsafe for the public.

The cost to businesses with liquor licenses can be significant. The
Department of Health and FDA are likely to make referrals of violators

to the State Liquor Authority. The fines will be in the thousands of
dollars, plus the legal costs and risk of losing the liquor license
altogether. The State Liquor Authority has much less tolerance for
what it considers irresponsible business practices that put the public
at risk. Repeat violators are not tolerated. The Liquor Authority
reminds licensees that having a license is a privilege. If you value it,
operate a legally compliant business establishment or you will lose
that privilege.

These are interesting times for businesses interested in using CBD in
their products. The more information that comes out about its
therapeutic effects, the more popular and money-making it becomes.
However, businesses may need to elect between hopping on the
financial bandwagon or being compliant with the law until the FDA
completes it process to declare it safe for human consumption.

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