The Future of Powdered Alcohol Rests With ... the Treasury Department?

By Brian Resnick

April 23, 2014

Fellow humans: We are on the verge of a game change. Alcohol, in the near future, may be available in powdered form. Like Gatorade and iced tea before it, booze will not be limited to bulky, liquid containers. Some might come to call it the "adult Tang." But for now, it's called "Palcohol"—short for powdered alcohol, not a portmanteau of "your pal, alcohol"—and it's currently going through the federal regulatory process.

In the last two weeks, the Alcohol and Tobacco Tax and Trade Bureau granted and then rescinded a label approval for the product. So the product won't hit shelves just yet. The makers will have to submit new labels for approval. But to have made it this far means the makers of Palcohol have already been granted a distilling licence and general approval of their beverage, says Robert C. Lehrman, a beverage attorney and namesake of Lehrman Beverage Law.

"Powdered alcohol—there are no rules about it," Lehrman says. "Even if they try to ban it, it's a little bit weird because presumably they would have to cite a rule, and I don't think there's one in the book."

So how does something like powdered alcohol—or any alcohol for that matter—gain approval from the U.S. government? Below, we break it down. (Warning: acronyms ahead)

We start with the weird fact that alcohol is regulated by the Treasury Department.

More specifically, it's under the Alcohol and Tobacco Tax and Trade Bureau (TTB), which resides in the Treasury Department. The bureau was created in 2003 after the Homeland Security reorganized the government.

The Bureau of Alcohol Tobacco and Firearms (ATF) used to regulate the alcohol industry. But in 2003, ATF moved to the Justice Department from Treasury, where the agency now focuses solely on criminal activity, such as smuggling. Regulation is left to TTB.

Historically, alcohol and taxes have been linked within the U.S. government—the Whiskey Rebellion, after all, was a confrontation about paying taxes. So it makes sense that alcohol regulation resides in Treasury.

But agencies don't always reside in the most logical places within the federal government. Consider that the National Oceanic and Atmospheric Administration (NOAA) is situated in the Commerce Department, not Interior.

So, is TTB the absolute authority over alcohol?

The short answer: No.

Congress gave the regulation of alcohol to the Treasury secretary in 1935 in the Federal Alcohol Administration (FAA) Act. The Treasury then delegated that authority to ATF, which has since been transferred to TTB.

But just three years later, in 1938, Congress passed the Federal Food, Drug and Cosmetic Act, which established the Food and Drug Administration (FDA) to regulate food. Food is defined as "articles used for food or drink for man or other animals." Alcohol is a drink used by man.

So the FDA also regulates alcohol?

Kind of.

In 1976, a U.S. district court ruling clarified the discrepancy between the two laws. "There is no question but that [FAA] legislation extends authority to regulate labeling of alcoholic beverages to the Secretary of the Treasury, who in turn has delegated that authority to the BATF," the judge wrote. "We are fully convinced that it was Congress' intention to place exclusive jurisdiction to regulate the labeling of alcoholic beverages in [ATF, which is now TTB]."

"Amazingly," the judge wrote, "this particular query has taken nearly forty years to reach the federal courts."

After that decision, ATF and the FDA came to a "memorandum of understanding," in which ATF would have primary regulatory control over alcohol, but FDA still can raise concerns over unsafe products.

So why aren't there nutrition facts on booze?

Because alcohol is not primarily regulated by the FDA, it doesn't have to adhere to FDA packaging rules. Lehrman puts it like this: "Whatever is the most confusing, byzantine, old-fashioned way, that's the way it's regulated," he says.

Ever try to find the calorie count on a bottle of vodka? Distillers don't have to list it. Want to know what makes that appletini in a bottle taste like apples? Ingredient lists aren't required. Even the disclosing of allergens is voluntary. Until 1995, it was actually illegal for a beer to label its alcohol content (the government was worried that brewers would engage in "strength wars," vying to make the most alcoholic beer on the shelf).

But TTB has other, sometimes subjective, requirements for its labels. "I once got a plum liqueur rejected because the government said it didn't taste like plums," Lehrman says. "Plumb was the main ingredient so that was kind of wacky."

Some of the rules are somewhat draconian. A label was once rejected because the manufacturers forgot a period at the end of the mandatory warning statement.

What power does the FDA have over alcohol?

Let's consider what happened to Four Loko.

Four Loko was a fruit-flavored malt beverage with added caffeine. The college kids bought it in droves when it was commonly available in 2010. Four Loko, and its imitators, were all cleared through TTB. That was until news reports of Four Loko-related hospitalizations began to circulate. The FDA stepped in, ordering companies to stop selling the drinks. (On one hand, there's nothing stopping anyone from making an equivalent Red Bull and vodka. On the other, a can of Four Loko was equivalent to three cups of coffee and three cans of beer.)

TTB followed through with the FDA's order. "If the U.S. Food and Drug Administration (FDA) deems their caffeinated alcohol beverage products adulterated under the Federal Food, Drug and Cosmetic Act," the bureau wrote, "we would consider them to be mislabeled under the Federal Alcohol Administration Act, making it a violation for industry members to sell or ship the products in interstate or foreign commerce."

The Federal Trade Commission also got involved with regulating Four Loko, insisting that it include serving sizes on the can.

So that's the final word on alcohol regulation?

Oh no, that's actually just the beginning. "Don't forget then there's 50 states with separate rules," Lehrman says. "Because of prohibition and the 21st Amendment, they can all do their own thing—and they do."

(Image via donfiore/

By Brian Resnick

April 23, 2014