New York City's health department has ordered restaurants to stop adding CBD to food and drinks, threatening to thwart the budding trend.
Bars, cafes and restaurants across the city have been increasingly adding CBD, short for cannabidiol, to cocktails, coffee and food. The compound, which comes from the cannabis plant, promises to deliver the calming benefits of marijuana without the high that comes from THC.
New York City's health department started cracking down on restaurants in the city last month, saying CBD wasn't approved as a safe product for consumers. It's now prohibiting businesses from adding the supplement to food or drink.
"The Health Department takes seriously its responsibility to protect New Yorkers' health," a spokeswoman said in an email to CNBC. "Until cannabidiol (CBD) is deemed safe as a food additive, the Department is ordering restaurants not to offer products containing CBD."
Most CBD was legalized in December when President Donald Trump signed the farm bill. Industry insiders and analysts expected this to fuel an already growing market. However, the Food and Drug Administration's ban on adding CBD to foods and drinks was seen as a possible hurdle.
The FDA prohibits companies from adding active ingredients that are drug products in foods and drinks. CBD falls into this category because it's the main ingredient in Epidiolex, a drug the FDA approved last year to treat severe childhood epilepsy.
When Trump signed the farm bill, FDA Commissioner Scott Gottlieb released a statement saying the agency would continue enforcing a ban on adding CBD to food and drinks while it looked into creating a pathway for such products to legally enter the market.
The New York City health department started embargoing CBD products in January. An embargo means officials ask restaurants not to use the products, but they don't remove them or ask restaurants to throw out or destroy CBD. So far, the city has ordered eight restaurants to stop using CBD.
Eric Cahan said he has already started pulling CBD-based food and drinks from his Manhattan cafe. Cahan co-owns Mamacha, which specializes in CBD matcha tea. He said the store has already pulled CBD cookies, chocolates and bottled tea and seltzer from shelves.
Cahan said he has also instructed his baristas to stop mixing CBD drinks. Customers normally can pay $4 to add 15 milligrams of CBD to their beverages. Now, Cahan said Mamacha is selling drinks and CBD oil separately. It's offering a two-day dose kit for $12 that people can use to mix into their drinks.
"It's weird, because it feels like the health department is against small businesses," he said. "Don't they want us to do well and continue? Why would they not want us to? It feels arbitrary and ridiculous."