Cannabis has hit the headlines again. In the US, Senator Chuck Schumer has just introduced legislation to decriminalise cannabis at the federal level… Cannabis Banking Financial Network The Drug Enforcement Administration (DEA) has recognised cannabis seeds as hemp as long as they don’t exceed the THC limit of 0.3%. This clarification
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.
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.
Marijuana seeds are legal in the U.S. as long as they don’t exceed the THC limit for hemp
The Drug Enforcement Administration (DEA) has recognised cannabis seeds as hemp as long as they don’t exceed the THC limit of 0.3%. This clarification makes them legal under the 2018 Farm Bill and it means that seeds can be shipped legally to anywhere in the country, which opens up a wide range of possibilities for the spreading of the genetic diversity of cannabis across the nation’s markets.
Marijuana may currently be banned by the federal government, but the Drug Enforcement Administration (DEA) has effectively recognised that the plant’s seeds are legal, regardless of how much THC they may end up producing when grown.
This means that cannabis growers can get their seeds from anywhere without having to worry about breaking federal law. Previously, and due to the federal ban, cannabis seeds were restricted to the state where they were produced, so a variety bred and grown in one state couldn’t legally go beyond the limits of that state.
The DEA recently conducted a review of the federal statute in response to a query from attorney Shane Pennington, who inquired about the legality of cannabis seeds and cuttings, and tissue cultures or ‘other genetic material’ containing no more than 0.3% THC.
After the passing of the 2018 Farm Bill, hemp was excluded from the definition of marijuana in the Controlled Substances Act (CSA), which means that currently all parts of the Cannabis sativa L. plant are not controlled, but only as long as they don’t exceed 0.3% THC.
“As a result, those marijuana seeds with a delta-9-tetrahydrocannabinol concentration of no more than 0.3% in dry weight meet the definition of ‘hemp’ and are therefore not controlled by the CSA”, states Terrence L. Boos, head of the DEA’s Drug and Chemical Evaluation Section, in a letter dated 6th January 2022. This comment was made in response to the issues raised by Shane Pennington, who has an extensive history of litigation against the agency on cannabis matters and drug policy.
Both hemp and marijuana seeds generally contain low THC levels, which don’t exceed the legal threshold, and so the DEA essentially permits the purchase of cannabis seeds, no matter how much THC the resulting plant may produce, provided the seeds themselves contain less than 0.3% delta-9 THC.
Nevertheless, it’s important to say that the use of any cannabis seeds with the intention of growing marijuana remains illegal at federal level, since the plant is still banned.
Was it illegal to sell marijuana seeds before?
Until now, cannabis strains have been isolated in the regions where they have been created or where they’ve arrived from other countries, as they couldn’t be transported beyond state borders. For example, although recreational marijuana is legal state-wide in both California and Oregon, moving a plant from one of those states to another is illegal at federal level. This forces cannabis growers and breeders to operate within the limits of the state.
Many cannabis breeders and seed banks sell seeds throughout the U.S. but operate in a legal ‘grey area’. Generally, the labels show that the seeds are sold as a collector’s item or a souvenir, which provides a way to circumvent the law. But if authorities find cannabis seeds in the mail, they may seize them and arrest the sender or recipient, although this is not common. However, all of that could have changed in 2018 without anyone actually knowing about it.
Definition of ‘source’ as opposed to ‘material’
In 2018, the U.S. Congress passed a Farm Bill for the legalisation of hemp in the country. ‘Hemp’ was defined as any cannabis plant with a THC level below 0.3%. With this bill, hemp can be grown and used for industrial purposes. The 2018 bill also permits hemp production for the creation of cannabinoids other than THC, such as CBD or delta-8 THC.
Cannabis seeds have always been considered illegal because they come from plants with high THC levels. As the source of the seeds has THC levels over 0.3%, anything that comes from those plants (including the seeds) has also been considered illegal cannabis.
But in November 2021, Shane Pennington, attorney at the law firm Vicente Sederberg LLP in New York, wrote to DEA officials asking for clarification on the definition of growing cannabis seeds, clones, and tissue cultures. Mr. Pennington argued that it’s not the source of the material but the material itself that determines its legality, which means that a cannabis seed with less than 0.3% THC should be classified as hemp. And if the seeds are hemp, then they’re not a controlled substance, and are therefore legal at federal level.
What implications does this have for the cannabis industry?
If the DEA and the federal government permit seeds to move freely across the country, anyone would then be able to grow seeds from anywhere in their own state and certain strains would no longer be confined to a specific region. This could potentially trigger interest in investment, the development of a larger industry, and greater acceptance of the plant, as well as the expansion of the area of genetic innovation. The removal of transportation barriers between states would open up the genetic pool of cannabis, which would in turn provide breeders with a greater diversity of strains to work with.
According to Pennington, the federal law seems to be more flexible than expected, and so perhaps the biggest implication is that this sends a clear signal to state regulators. In fact, DEA officials last year clarified to the regulatory authorities that delta-8 THC, an increasingly popular psychoactive cannabinoid, was also not a controlled substance under existing law, because the 2018 Farm Bill that legalised hemp doesn’t explicitly prohibit THC isomers.
The states follow the DEA’s lead by creating their own drug laws, so watching the government agency relax its stance on cannabis seeds could get these states to do the same, thereby breaking protectionist state laws.
However, it’s important to highlight that, even though the DEA calls it ‘an official determination’, it is still not entirely clear whether they are legally bound to this position. For now, the DEA’s recognition that seeds, cuttings, and cannabis tissue cultures are not controlled substances is not a law, but it does signify a big step forward in easing the restrictions on marijuana.
Kannabia Seeds Company sells to its customers a product collection, a souvenir. We cannot and we shall not give growing advice since our product is not intended for this purpose.
Kannabia accept no responsibility for any illegal use made by third parties of information published. The cultivation of cannabis for personal consumption is an activity subject to legal restrictions that vary from state to state. We recommend consultation of the legislation in force in your country of residence to avoid participation in any illegal activity.
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