Cannabis Banking Financial Network Last month marked the start of the typical marijuana grow season, which runs March through November, which meant individuals and large cannabis firms in — April 21, 2019 Cannabis has hit the headlines again. In the US, Senator Chuck Schumer has just introduced legislation to decriminalise cannabis at the federal level…
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.
Legal Issues in Selling Cannabis Seeds in California
Last month marked the start of the typical marijuana grow season, which runs March through November, which meant individuals and large cannabis firms in California were on the hunt for high-quality seeds for purchase on the legal market. Cannabis seeds are at the core of the California marijuana industry, and the internet can connect farmers from San Diego to San Francisco and beyond to the growing demand.
But are sales of cannabis seeds legal? Some growers serve both the grey and legal market marijuana seeds.
As the legal cannabis market has expanded, selling cannabis seeds has become more commonplace, especially as consumers’ tastes become more refined. Still not all cannabis seed sales are lawful.
Genetic Seed Variations Can Be Protected Intellectual Property
Los Angeles marijuana lawyers recognize there is great diversity in seed genetics, and advise companies to seek counsel before arranging any kind of retail sale or transport.
Many marijuana growers pride themselves on their extensive knowledge of marijuana growth, which obviously begins with the seed. The three basic types of cannabis seeds are regular, autoflowering and female, with each containing broad subtypes, often referred to as “strains.” Many cannabis cultivators pride themselves on various elements of the strains they grow, as the effects can vary widely depending on seed properties. Certain strains are better for those seeking medicinal relief, while others are better for creating various degrees of intoxication and still others for a distinct taste. Growers are increasingly asserting intellectual property rights, something all cultivators should discuss with their cannabis business attorney.
Cannabis Seed Sales and California Law
Laws pertaining to sales of marijuana seeds or associated products vary a great deal in the U.S. and beyond, in part because there is a general lack of understanding on how they should be defined. Some consider seed sales ancillary to the cannabis market, but the reality is because these are part of the cannabis plant (or rather, its origins) these too are controlled.
Generally speaking, cannabis seeds can be lawfully purchased by adults states with legal adult recreational use (like California) either at a dispensary or online intrastate (meaning not purchased from another state – even one that has also legalized the drug). The reason for this restriction is that interstate sales fall under the purview of federal law, which still considers marijuana a dangerous narcotic.
Los Angeles marijuana dispensaries routinely sell pot seeds over-the-counter, and cost is roughly $12 for a pack of 10, though higher-end strains can run several hundred dollars. Dispensary options are limited compared to what one might find online at a California cannabis seed bank.
The California Cannabis Control Board in accordance with Prop. 64 caps the maximum number of cannabis plants that can be grown by an individual at any given time at six. That assumes you’re over 21 and aren’t doing so in a community that has a local ordinance banning or further restricting such cultivation.
Those selling cannabis seeds in California, either in-store or online, need to be certain procedures are in place to prevent sales to restricted buyers (mostly minors).
Buying, selling or transporting those seeds out-of-state though is where things can get dicey.
International Weed Seed Sales
Internationally, many countries don’t restrict or regulate cannabis seed sales, as the seeds have a myriad of benign uses. These can include production of clothing material, oils and food for animals/fishing bait.
However, other countries are much more strict about what can be imported and for what purpose. Los Angeles cannabis lawyers strongly advise anyone conducting international sales of any cannabis product to consult with an attorney. Failure to do so could affect your pocketbook (if customs in another country refuses to allow your shipment to reach its final destination). However, it can also draw the attention of U.S. law enforcement agents, with the possibility of criminal charges.
The Los Angeles CANNABIS LAW Group represents growers, dispensaries, collectives, patients and those facing marijuana charges. Call us at 949-375-4734.
The curious case of cannabis seeds and the criminal law
Blog Corker Binning Blog
Cannabis has hit the headlines again. In the US, Senator Chuck Schumer has just introduced legislation to decriminalise cannabis at the federal level. In the UK, institutions as diverse as the Green Party and the Institute of Economic Affairs have added their voices to the chorus of people calling for cannabis to be legalised. Against this background, a recent extradition request from the US to the UK has exposed an intriguing discrepancy between the criminal laws of both countries concerning cannabis seeds.
In The Queen on the application of the United States of America v Gypsy Nirvana  EWHC 706, the US sought the extradition from the UK of a defendant accused of trafficking, exporting and importing marijuana seeds (and related money laundering). The District Judge at first instance found, and the Divisional Court on appeal agreed, that this conduct did not constitute a criminal offence contrary to UK law. Thus the “double criminality” rule of extradition was not satisfied, i.e. had the defendant trafficked, exported or imported marijuana seeds in the UK, he could not have been prosecuted in the UK. The defendant was therefore discharged from the extradition proceedings.
The Court’s decision is based on a deliberate but nonetheless curious lacuna in UK law. Cannabis has been classified as an illegal drug in the UK since 1928 (and since 1971 it has been illegal for doctors to prescribe it for medical use). However, at no point have cannabis seeds been criminalised under UK law. Cannabis seeds are not a controlled drug for the purposes of the Misuse of Drugs Act 1971 (“MDA”). Consequently, selling cannabis seeds is not a supplying offence, nor is the export or import of cannabis seeds prohibited or restricted. The Court in Gypsy Nirvana cited with approval R v Jones  2 Cr App R 10, in which Leveson LJ observed that:
“it is not illegal to offer for sale or supply the paraphernalia associated with smoking cannabis and nor is it illegal to offer for sale or supply the equipment necessary to grow the plant, books which explain how cannabis may be grown or, indeed, cannabis seeds. As a result, there are a number of shops and other outlets which offer these goods for sale but it is obviously very important that these premises do not overstep the line and incite the commission of an offence.”
The reference to “overstepping the line” is understandable in light of section 6(1) MDA, which criminalises the cultivation of any plant of the genus cannabis. If D1 sells cannabis seeds to D2, D1 may, depending on the facts, be regarded as committing an inchoate criminal offence by inciting D2 to cultivate cannabis. In these circumstances, which inchoate offences could D1 be charged with?
Although the common law offence of incitement was repealed in 2008, several statutory offences of incitement remain in force. These include section 19 MDA, which provides that:
“It is an offence for a person to incite another to commit an offence under any other provision of this Act.”
There are similar offences in sections 44-46 of the Serious Crime Act 2007 (“SCA”). Section 44 SCA criminalises intentionally encouraging or assisting an offence. Section 45 SCA criminalises encouraging or assisting an offence, believing it will be committed. Section 46 SCA criminalises encouraging or assisting offences, believing one or more of those offences will be committed. A UK-based operator of a cannabis seed business is potentially exposed to all of these inchoate offences, even though cannabis seeds are not themselves illegal. When, therefore, does selling something which is not itself illegal attract criminal liability because the circumstances of the sale are such that they constitute incitement to commit an offence? Case law provides some guidance.
In R v Marlow  1 Cr App R 273, the defendant appealed against his conviction for incitement to cultivate cannabis contrary to section 19 MDA. The defendant had sold approximately 500 copies of his book on cannabis cultivation. The prosecution argued that the book was a “grower’s guide”, such that the defendant’s intention in inciting others to cultivate cannabis was self-evident. The defence argued that the book simply gave advice and information which was freely available elsewhere, and that its sale was too remote from the actions of those reading it to constitute incitement. His conviction was upheld.
Similarly, in Jones, the defendant’s conviction was upheld for incitement to cultivate cannabis contrary to section 19 MDA. The defendant’s shop sold smoking paraphernalia and hydrophonics equipment. An undercover police officer went to the shop to make test purchases and, posing as a would-be cannabis grower, asked the defendant for advice. After what was alleged to be a pretence that they were discussing tomatoes, that advice was freely given. The prosecution case was that the advice and sale of equipment amounted to incitement. The defence argued that the items he sold were not illegal and that he had taken steps to ensure he stayed within the law, i.e. not mentioning cannabis by name, only mentioning tomatoes, telling the undercover officer that it was illegal to cultivate cannabis and pointing to notices in the shop advising that it was illegal to cultivate cannabis. The Court found that it was open to the jury to conclude that the word “tomatoes” was no more than a device to avoid saying the word “cannabis”, and that the defendant’s positive advice about the safest and most productive way to grow “tomatoes” was evidence of an intention to incite cannabis cultivation.
To prove an offence of incitement it is not necessary to prove that anyone was in fact incited. The offence of incitement is committed when the inciting words or conduct take place. In Marlow, the book was capable of persuading someone to cultivate cannabis, and it was clearly published and sold for that purpose, regardless of whether anyone tried to implement its advice. Likewise, in Jones, the advice relayed to the undercover officer, together with the sale of the equipment, evidenced a desire to encourage the officer to cultivate cannabis.
In light of Marlow and Jones, it might be asked: doesn’t the act of selling cannabis seeds constitute sufficient incitement to cultivate them contrary to section 19 MDA or sections 44-46 SCA? What, after all, is the purpose of selling industrial quantities of cannabis seeds, often to repeat customers, if not for their cultivation? Even if the seller puts disclaimers on his website that cannabis cultivation is illegal, that is no different to the defendant in Jones who plastered his shop with such warnings to maintain a veneer of legality.
In Gypsy Nirvana, the court’s answer to these questions was that the essential conduct alleged against the defendant in the US was trafficking, exporting and importing marijuana seeds. There were no analogue offences under UK law which mapped onto this conduct. The conduct alleged in the US was not described as a conspiracy to cultivate cannabis, nor encouraging or assisting cannabis cultivation, for which there would be analogue offences under UK law.
Arguably, this is a narrow and artificial application of the dual criminality rule. It is well-established that the analogue offence under UK law does not need to be on all fours with the offences alleged in the requesting state. Extradition practitioners will be aware that, in practice, the UK courts often adopt a purposive (some might say creative) approach to finding a UK offence which maps onto the conduct alleged by the requesting state.
But in Gypsy Nirvana, unlike in Marlow or Jones, it seems that there was no evidence that the defendant had said or done anything which could be construed as positive encouragement or advice as to how the seeds should be cultivated. The evidence in the US extradition request proved only that the defendant had sold the seeds. Even the widely and elaborately drafted inchoate liability provisions of the SCA (which postdate Marlow and Jones) could not stretch wide enough to capture the conduct of which the defendant was accused. These provisions could not be used to close the deliberate lacuna in UK law that the mere selling of cannabis seeds is lawful, unlike the position under US law.
If cannabis is legalised in the US, the case of Gypsy Nirvana will become no more than an interesting but academic footnote. Its long-term interest is that it illustrates the limitations of the law of incitement, not just in relation to drugs offences, but across the whole panoply of offences in English criminal law.