Should powdered alcohol be on the market? Critics say no way.

A new product that promises to turn water into alcoholic drinks has created a stir this month after it first cleared a federal regulatory hurdle, but then that approval was rescinded.

Known as Palcohol, the product consists of small, one-ounce packets of powder that, when mixed with water, turn into rum, vodka, or one of four cocktails: cosmopolitan, mojito, Powderita (“tastes just like a Margarita”) and lemon drop.

On April 8, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) approved labels for the packaging of Palcohol. But in a statement Monday, the agency said: “Those label approvals were issued in error and have since been surrendered.”

While the owner of Palcohol, Lipsmark, pointed to technical problems with the labels, some others contend that the federal government rethought its decision.

This much is for sure: There has been no shortage of anti-alcohol groups and research groups criticizing the product, and the company has moved into defensive mode, trying to respond to the coverage.

“[I]t’s amazing how many news outlets have so many facts wrong about Palcohol,” says the product’s website, Palcohol.com. One mistake: “that a package has 65% alcohol by volume (it has 10-12%).”

Critics of Palcohol have expressed a range of concerns, about everything from potential young users to snorting of the product.

“It’s easy to hide and take places where it’s undetectable,” said Jan Withers, national president of Mothers Against Drunk Driving, during the “NBC Nightly News” telecast on Monday. “Again, this helps point out the importance that parents need to stay on top of this.”

Carole Lieberman, a well-known Beverly Hills, Calif., psychiatrist who treats patients with alcoholism and other addictions, cites school, concerts, and sporting events as places where teens might try to sneak Palcohol.

The development of this powdery product is a troubling sign of the times, others say.

“First, legalized marijuana. Now, alcohol in powdered form. No matter that Federal approval was reeled in. The genie is out of the bottle,” says Ben Agger, director of the Center for Theory in the sociology department at the University of Texas at Arlington. “Clearly, we are heading rapidly toward a convenience-store approach to getting high and getting wasted,” says Dr. Agger, whose made his comments via e-mail.

Not everyone sees it that way, however.

“Palcohol is like any other regulated product; if used properly and in moderation, there shouldn’t be an issue,” says Freeborn & Peters attorney Ashley Brandt, who serves as a member of the firm's Food Industry Team and runs the “Libation Law Blog.” Each new use that people consider could lead to unintended consequences, he says in an e-mail interview, “but in general, the consequences of abuse and overconsumption are pretty well understood and documented.”

Lipsmark, which is located in Phoenix, insists it is headed for an autumn rollout of the product.

The Palcohol website comments on the rescinding of the label approval: “[T]here seemed to be a discrepancy on our fill level, how much powder is in the bag. There was a mutual agreement for us to surrender the labels.”

It continues, “This doesn’t mean that Palcohol isn’t approved. It just means that these labels aren’t approved. We will re-submit labels.”

Others say that something else may be going on.

The discrepancy over fill volumes “doesn’t merit a lengthy lag-time for approving new labels that correct the error in the fill volumes,” says Mr. Brandt, the attorney. “The fuss over the product in the press was likely the reason.”

Some organizations are urging the public to get involved at the state level. In the event that TTB approves the labels, states would then have considerable say in regulating sales of the product.

“If people see the development of this product as a threat, they can take the issue to their state legislators, who can see that Palcohol is not sold in state liquor stores,” says Sarah Mart, director of research at Alcohol Justice, a California nonprofit in San Rafael.