Cannabis Banking Financial Network Cali bud could end up on the East Coast easier than you think, according to a new official determination from the DEA. Exploring the cannabis seed paradox: cultivators must break the law in order to obtain seeds to grow legal cannabis. Can this issue be fixed?
Is It Illegal To Sell Cannabis Seeds
If cannabis flower is federally illegal because it contains Tetrahydrocannabinol (THC), are cannabis seeds legal because they don’t? It’s a fair question that many people have asked and, while the answer is “no” federally and “it depends” by state, there is an active legal cannabis seed trade occurring every day in the U.S. – and it is rapidly growing. While the legal questions evolve and new legislation surfaces in state capitols and Washington D.C., there is cash tied to the sale of cannabis seeds in need of banking.
Is it legal to sell cannabis seeds?
Cannabis seeds are illegal to sell across state lines due to the ongoing federal prohibition against cannabis and cannabis products. However, depending on state law, consumers may be able to purchase cannabis seeds legally from a breeder, dispensary, or other cannabis business – even if they don’t have a license to sell cannabis products that contain THC.
Cannabis seeds find themselves in a legal grey area because they don’t contain any THC – when a cannabis product contains 0.3% THC content or less, it is considered legal since the signing of the 2018 Farm Bill. However, they remain federally illegal to buy and sell. In states where cannabis is legal, cannabis seeds could sometimes be bought and sold within state borders by licensed businesses only, depending on state law. State laws governing the sale of cannabis seeds can vary from state to state.
Can retailers who sell cannabis seeds get a bank account?
For THC licensees who also sell cannabis seeds, banking is available as it would be for other activities that fall under the scope of that license. In other words, a dispensary would have little trouble adding cannabis seeds to their inventory if they already worked with a cannabis-friendly bank.
However, unlike THC licensees, there is not a clear federal regulatory framework on how to bank money derived from state-compliant cannabis seeds sales from non-THC licensed operators. As a result, this sector of the legal cannabis industry comes with a great deal of uncertainty and risk, every banker’s least favorite combination.
So, for example, a garden shop stocks all types of seeds, including cannabis seeds, which become a substantial portion of the shop’s business. Unlike a licensed dispensary, this garden shop does not deal in other cannabis products, and yet cannabis seeds remain a significant percentage of overall revenue. The regulations that bank examiners use for THC licensees doesn’t necessarily apply to the garden shop and so many bankers remain uncertain how to approach this type of situation (and therefore tend to avoid it).
In this way, cannabis seeds are more like CBD products or Delta-8-THC: largely unregulated from a banking perspective.
The difference between CBD banking and cannabis seeds banking, though, is that while the U.S. cannabis seeds market is expected to eclipse $1.5 billion in total value by 2027, the American CBD industry already drives more than that in sales each year. More niche sectors of the industry like the cannabis seed trade and Delta-8 THC distillates face an even steeper uphill battle in securing compliant banking and merchant processing services than CBD businesses.
That’s not to say banking isn’t available for these sectors. However, bankers generally tend to be less informed about cannabis seeds than THC licensees or even CBD businesses. At any time, a bank could take a closer look at sectors like cannabis seeds or Delta-8-THC and decide the uncertainty is too great and the business opportunity too small (relative to broader markets like CBD) to take the risk – at any time, a bank could choose to terminate these accounts and suspend merchant processing services.
Cannabis seeds businesses might be legal in your state but remain federally illegal – and without a THC license, it’s not exactly clear to bankers how to compliantly manage your account. However, unlike THC licensees, federal bank examiners have produced no real guidance on how to bank profits earned through the purchase and sale of cannabis seeds. While THC licensees handle a federally illegal product, bankers have guidance, and therefore more certainty, on how to bank them in a compliant manner. There is no such assurance when it comes to cannabis seeds businesses.
This has led many cannabis seeds businesses to mischaracterize their operations to their bank, posing as an agricultural company under some obscure name and withholding information about cannabis-related operations. Not only does this carry significant business consequences, it appears that law enforcement is cracking down on fraud in cannabis banking and payment processing. This approach is not only obsolete but puts your business at a competitive disadvantage. Yesterday was the best time to transition to transparent, compliant cannabis banking, but right now is the second-best time.
How to find a stable banking relationship for cannabis seeds businesses
Cannabis entrepreneurs know few things are certain and those that are won’t be for long. The same is true for cannabis banking, but you can take certain steps to improve your chances of finding, retaining, and maintaining a stable relationship with your bank.
The first and most important step is to identify a cannabis-friendly bank and approach them in full transparency. That can be easier said than done. Many cannabis-friendly banks don’t openly advertise the fact that they work closely with the industry. Even if they embrace the industry and the business opportunities that come along with it, many remain cautious about the optics of being associated with a federally illegal product.
That’s where banking networks like Fincann come in. We’ve been doing the hard work in the trenches for years, forging relationships with financial institutions that are ready and willing to work with the legal cannabis industry, including cannabis seeds businesses. As of April 2021, Fincann’s Cannabis Banking Financial Network™ offers compliant cannabis banking and merchant processing services for every sector of the industry in all 50 states.
What banking services are available to cannabis seeds businesses?
Once you and your new bank have been introduced, including a full review of business operations and financials, you’ll know you have a banking partner that understands and supports your business. And, if you’re in need of merchant processing services, there are several legitimate, compliant options available to all sectors of the cannabis industry: merchant processing accounts, “PayPal-style” e-wallets, closed-loop and loyalty cards, high-profit ATMs, and ACH-based apps and transfers.
Merchant processing accounts support in-person debit transactions, allowing customers to make cannabis purchases using their checking account and PIN number. ACH transfers support an online payment functionality for e-commerce stores. Customers simply input their routing and account number and confirm their payment to checkout online. Both methods are 100% legally compliant and transparent with the facilitating bank.
Cannabis banking made better with Fincann
There is no longer any need for a business in any state or sector of the legal cannabis industry to lie to their bank or use illegal payment processing workarounds. With banking networks like Fincann and payment processing solutions like merchant processing accounts and online ACH transfers, cannabis businesses have effective, legal, and straightforward options. The future of the cannabis industry is legal and transparent; don’t fall behind, call Fincann and transition to better cannabis banking today.
Weed seeds may be legal to ship across the US, DEA says
Cannabis commercial and home growers alike may be able to get their seeds from all over the country now, and not have to worry about breaking federal law. Before, because of federal illegality, cannabis seeds have been restricted to the state in which they were produced, so a strain bred and grown in one state, legally, could not go beyond that state’s boundaries.
A recent legal clarification by the federal Drug Enforcement Administration (DEA) could mean that the seeds of cannabis strains popular in one part of the country could legally be shipped to another part of the country, because the DEA considers all forms of cannabis seeds to be federally legal hemp.
That means strains popular in mature markets like Washington, Oregon, and California could make their way to legal markets on the East Coast in Massachusetts and Maine, and soon-to-open markets like New Jersey and New York.
Marijuana Moment reporter Kyle Jaeger recently unearthed a letter from DEA officials that clarifies the definition of cannabis seeds, clones, and tissue cultures, which could open up a whole range of possibilities for cannabis growers, and could spread a diversity of strains across legal markets all over the country, opening up the gene pool and leading to new trends and tastes in weed.
Are weed seeds illegal?
Right now, cannabis strains are somewhat isolated in the regions they are bred and created, as they can’t be transported beyond state lines. For example, even though recreational weed is legal at the state level in both California and Oregon, moving a plant from one of those states to the other is illegal at the federal level. This forces cannabis growers and breeders to operate within the confines of a specific state.
That’s not to say that a strain bred in California won’t end up in Oregon—it happens all the time, but it is technically illegal, according to federal law.
Many cannabis breeders and seed banks sell seeds throughout the US, but they operate in a legal gray area. Typically, seed producers say their seeds are sold for “novelty” or “souvenir” purposes, giving them a loophole to skirt the law.
If cannabis seeds are found in the mail, they could be seized and the sender or receiver arrested, however, the fact of the matter is that seeds are very difficult to detect. Cannabis seeds are usually less than a ¼” in diameter and don’t smell like weed. A packet of 10 seeds is about the size of four quarters stacked.
But all that might have changed in 2018 without anyone knowing.
Defining ‘source’ vs. ‘material’
In 2018, Congress passed a farm bill that legalized hemp in the US. It defined “hemp” as any cannabis plant with less than 0.3% THC. This allows hemp to be grown and used for industrial purposes—for creating textiles and materials. The 2018 bill also opened up hemp production for the creation of cannabinoids other than delta-9 THC, such as CBD, delta-8, and others.
Because CBD and delta-8 products are usually extracted from hemp plants, that is, cannabis plants containing less than 0.3% THC, they can be found in states that don’t have legal, recreational cannabis.
In November, Shane Pennington, counsel at Vicente Sederberg LLP in New York, wrote to DEA officials asking for clarification of the definition of a cannabis seed, clone, and tissue culture.
Cannabis seeds have always been deemed illegal because they come from plants that are high in THC. The source of the seeds is above 0.3% THC, and therefore anything that comes from those plants, such as seeds, has also been considered illegal cannabis.
Pennington argued that the source of the material doesn’t determine legality, but the material itself—meaning that because a cannabis seed itself contains less than 0.3% THC, it should be classified as hemp. If seeds are hemp, they are not a controlled substance—and are therefore federally legal.
“When it comes to determining whether a particular cannabis-related substance is federally legal ‘hemp’ or schedule I “marihuana,” it is the substance itself that matters—not its source,” Pennington wrote in a blog post.
Exotic Genetix Mike, founder of cannabis producer Exotic Genetix, said the DEA’s ruling “Is what we’ve always kind of practiced. [Seeds contain] less than 0.3% THC—they’re not a controlled substance.”
Mike welcomed the news: “It’s been clarified. Not just what we do is legal, but the money we make for doing it is also legal and not an illegal enterprise.”
What implications does this have for the weed industry?
If the DEA and federal government allow seeds to cross state lines, adults could grow and consume seeds and strains from all over the country in their own state. Certain strains would no longer be confined to a specific region, but could be enjoyed all across the nation.
“It’ll spark innovation, if people can bring it above ground, it can be regulated,” said Pennington in an interview with Leafly.
Regulation can bring more investment, a bigger industry, and more acceptance of the plant.
Breaking down transportation barriers across states would also open up the cannabis gene pool, giving breeders a bigger diversity of strains to work with. The number and diversity of new strains would likely increase, tapping into new consumer trends and flavors.
More strains also means that certain strains could be pinpointed and bred specifically for certain effects, whether for medical or recreational purposes.
But according to Pennington, perhaps the biggest implication is that “This sends a signal, clearly, to state legislators, state regulators, and to groups that lobby those folks… the federal law is more flexible than you assumed.”
States take their cue from the DEA when creating their own drug laws, so seeing the agency relax its stance on shipping cannabis genetics could cause states to follow suit, breaking down protectionist state laws.
This could also open up more accurate research on the plant, according to Pennington. For decades, cannabis research was limited to The University of Mississippi, which grew weed with a low potency, around 8% THC. However, most dispensaries sell cannabis with a THC percentage around 20%. Being able to ship genetics across the country would allow for more robust research into the plant, using strains that mirror what adults are actually buying in stores and consuming.
How binding is the DEA letter?
The DEA calls the letter an “official determination,” but whether or not they are legally bound to this position is a bit hazy.
“That to me sure seems like something the agency would either be bound to going forward or at least be very hesitant to deviate from in any kind of enforcement context,” said Pennington.
For now, the DEA’s acknowledgment that cannabis seeds, clones, and tissue cultures are not controlled substances isn’t law, but it is a big step forward in relaxing restrictions on cannabis.
The Cannabis Seed Paradox: Breaking The Law To Grow
You’ve seen our physicians at Green Health Docs . You have your certification. You’ve registered with the state and gotten proper authorization to grow medical cannabis at home. But then comes the cannabis seed paradox!
Find out what the cannabis seed paradox is below. And how cultivators get around it. (Hint: they break the law)
The Cannabis Seed Paradox
Once you have your home cultivation authorization, it’s time to start growing medical cannabis . But there’s one small hitch. Where the hell does one get seeds?
Well, here’s the rub. Seeds are illegal. That is, it is illegal under federal law to move cannabis across state lines. This includes full grown plants, clones, seedlings or even seeds themselves. Yup, you read that right. Home cultivators will need to do something illegal in order to grow legal medical cannabis.
Some clinics and cultivation businesses may offer seeds for free, a quick and easy way for patients to bypass this hurdle. But literally thousands of Missouri medical marijuana patients will be stuck searching for places to buy seeds. And regardless of legality, many patients will try to buy or order seeds online in order to get a specific strain that caters to their medical needs.
Selling Seeds is Illegal, Online or in Missouri
Even retailers are walking a thin line when it comes to selling cannabis seeds in Missouri. Proper state authorization is required in order to sell cannabis products, like dry flower, edibles or oils . Products can only be sold to state medical marijuana patients. Seeds will likely not be sold in medical marijuana dispensaries, though that’s a possibility at some point.
Anyone selling seeds outside the medical marijuana arena is likely doing so without legal authorization. This puts their business at risk for penalty or punishment if caught.
Seeds sold online are typically sold in states or countries where cannabis is legal. However, shipping seeds in the mail is a federal crime. If you’ve ever been burned by purchasing seeds online, chances are your seeds were simply confiscated by authorities before making their way to your door.
Seeds online are also a crap-shoot. You may get that award-winning strain, or you may get some messed up hybrid that gives you the jitters. And worse, you won’t know until harvest. Buying online isn’t the best way to get seeds, but sometimes it’s the only option from some cultivators.
Bypassing the Law?
Even large scale cultivators will face the cannabis seed paradox. In order to begin their grows, they must either bring in seeds or clones from another state or country. As cannabis is still illegal under federal law, crossing the border or state lines constitutes of federal felony. Getting caught could result in severe legal punishment, possibly even jail time.
And yet, cultivators grow cannabis in every state with an active marijuana program. That means the law was broken with no real consequence. Seeds, after all, are fairly innocuous and difficult to detect. A pack of seeds could fit into a wallet, or even a small envelope with no trouble whatsoever. Seeds give off little to no smell, and are largely indistinguishable from hemp seeds. It is a crime to move seeds across state lines, but it’s an undetectable crime that doesn’t harm anyone. This is likely why it goes unpunished.
Clones, on the other hand, are far easier to detect. Cannabis has a smell beginning around the first few leaves. The smell is surprisingly dank by this stage. Moving clones across state lines is a much riskier endeavor. Many cultivators will risk it, however, as it greatly speeds up the time to harvest. This means that patients get medical cannabis in their dispensaries much faster.
Legalizing Cannabis Seeds
Even if the federal government decides not to reschedule cannabis, removing it from the list of the most restricted drugs in the country, something must be done about the cannabis seed paradox. This issue affects every single state with a medical marijuana or recreational marijuana program.
Ohio faced this issue when their program launched in 2016. Maryland also faced this paradox a year earlier with their program. And this same paradox struck Michigan, Pennsylvania and Illinois. The list goes on…
Legalizing cannabis seeds and clones for authorized businesses and medical marijuana patients makes sense. It allows the federal government to properly track each sale of cannabis seeds and clones. This gives them a better sense of what is moving where, and when. This could also lead to better tracking of black market cannabis.
And let’s be real. Legalizing cannabis seeds and clones allows safe passage for those seeds and clones, and the employees entrusted with the task of moving them. There are a lot of noble botanists trying their best to bring good quality cannabis to medical marijuana patients. But those heroes are putting a lot on the line when moving seeds across state lines or borders. Legalization would protect them and allow these employees to do their job more efficiently.
Legal Seeds for Patients
Patients with proper home cultivation authorization should also be allowed to purchase and transport seeds or clones across state lines from authorized retailers. Full stop.
Seed and clone tracking, if necessary, could be done through the same database established for tracking medical marijuana purchased in the state at dispensaries. The state could even regulate high potency strains, if such a thing were cause for alarm.
Regardless, a medical marijuana patient deserves the freedom to legally grow their cannabis, and one of those stages is buying the actual plant itself. If a patient is allowed to grow cannabis, they should be allowed to buy cannabis seeds. The whole process should be legal, from seed to medication.
Getting Your Certification
In order to grow cannabis at home, a qualifying patient must first get a certificate to use medical cannabis. You can do so by seeing one of our licensed medical marijuana physicians at Green Health Docs in Missouri . They can help you get certified, and our support team can walk you through the home cultivation application process. To get started, simply call 1-877-242-0362 today! Patients can obtain a card either in-person at our Missouri clinics, or through online.