The DEA Acknowledged That Cannabis Seeds Are Legal to Sell. So, What Does That Mean for the Industry?

In January 2022, an official at the U.S. Drug Enforcement Administration (DEA) quietly confirmed that, yes, cannabis seeds fall under the legal definition of hemp and, yes, they can be sold openly and without criminal liability.

Breeders and growers haven’t exactly taken the administration up on that suggestion yet, however.

“Marihuana seed that has a delta-9-tetrahydrocannabinol concentration of not more than 0.3 percent on a dry weight basis meets the definition of ‘hemp’ and thus is not controlled under the CSA,” wrote Terrence Boos, chief of the Drug and Chemical Evaluation Section of the Diversion Control Division of the DEA. The official determination invoked the regulatory language of the 2018 Farm Bill. Read Boos’s full letter below.

Boos was responding to a letter from Vicente Sederberg attorney Shane Pennington, who sought clarity on this matter.

“This is one of the areas that I get a lot of questions about,” Pennington told Cannabis Business Times, referencing the vagaries of seed and genetics sourcing in the industry. He felt that the 2018 Farm Bill, with its definition of hemp as any aspect of the plant containing less than 0.3% THC, should give licensed business buying and selling cannabis seeds some degree of cover—“and nobody believed me.”

So, he wrote a letter and sent it straight to the top brass at the DEA. He knew the DEA was under no obligation to answer him, but on Jan. 6 Boos penned his response. Marijuana Moment first reported on the news.

 

While the cannabis seed market has generally operated outside the limelight of the legal, licensed business landscape, the DEA’s official determination suggests that more transparency may be possible for breeders and growers. But is that what the industry wants?

Cannabis breeder Rick Mosca of Mosca Seeds said that, at the very least, the acknowledgment from the DEA was “very comforting for a lot of folks.” He pointed out that this official determination may pave the way for brick-and-mortar seed sales in the future, something that is not yet widespread in practice. Mosca has no plans to open such a store (Mosca Seeds sells online and through distributors), but the principle of the matter could very well be a boon for the industry.

In Chicago, MoneyTree Genetics is opening a new genetics bank that will sell seeds and clones to cannabis growers—including those working in state-legal markets that allow THC-rich cultivars. Business owners told Cannabis Business Times that they’re operating under 2018 Farm Bill guidance, and that the 2022 DEA official determination provided even more support for their work.

Elsewhere, breeders are eager to embrace a rare federal decision that actually serves the benefit of the industry.

“We’re very interested in the new DEA [determination],” California-based Dark Heart Nursery CEO Daniel Grace said. “This seems to be a green light from the feds that genetics can start moving across state lines. Many breeders are already taking advantage of this. However, most, if not all, state regulatory programs still require closed-loop seed to sale systems. As a result, state regulations and regulators still pose a problem here. Ironically, in this case, the feds are saying ‘yes,’ but the state is still saying ‘no.’ Hopefully states will act promptly to clear up this discrepancy and allow the interstate and international genetics space to flourish.”

In Michigan, for instance, licensed cultivators may only purchase seeds from other licensed cultivators or from licensed caregivers serving medical patients. Those caregivers, however, may purchase seeds from out of state, effectively bringing them through the back door into the licensed adult-use cannabis market in Michigan.

In Massachusetts, licensed growers are given 90 days from the point of earning a certificate of occupancy to obtain seeds. Cultivation businesses may source genetics from seed banks or fellow growers—but only in that 90-day window. This is known colloquially as the “immaculate conception” principle. After that 90-day window, the sources of all genetics must be cited in the state’s METRC-based tracking system (e.g., via METRC-tagged mother plant cuttings or METRC-tagged seed purchases within the state).

That tight timeline puts the onus on newly licensed cultivation businesses to identify helpful, transparent seed vendors from the jump. “It’s best to work with companies that are proven,” Mosca said, “companies that have been in the business and deliver quality and consistency among their genetics. A lot of that is shared information through social media and magazines.” Word of mouth prevails in this mostly furtive sector of the market. But that does not mean it’s a clear-cut solution for cultivation teams.

Off the record, growers in Michigan, Massachusetts and elsewhere have confirmed to Cannabis Business Times that the seed sourcing question is effectively a “don’t ask, don’t tell” situation.

With that in mind, Dark Heart hasn’t yet begun selling seed directly to licensed cultivators—“due to the state-federal disconnect,” Grace said. The company presently sells retail-packaged seeds through licensed dispensaries.

That disconnect between the federal stance (vis-à-vis the 2018 Farm Bill and the 2022 DEA official determination) and the state-by-state stances (a spectrum of policies that serves as a good reminder to know your local statutes when getting into this business) is a stumbling block that any startup cultivation business will need to confront.

“Ironically, in this case, the feds are saying ‘yes,’ but the state is still saying ‘no.’”

– Dark Heart Nursery CEO Daniel Grace

Matt Simmons of Elev8 Seeds said that this undermines otherwise good-faith attempts to stock a genetics library when launching a cultivation business.

“While [the DEA official determination] does make a big difference federally, many of the states include ‘seeds’ when they define what cannabis is,” he said. “Because of the definition on a state level, this does not give the producers within that state a clear path as to how they can acquire fresh genetics. In the state’s attempt to exert total control over anything that is related to the plant, they are directly limiting the quality of the product which they depend on for tax revenue without any clear benefit in their goal to keep THC out of the hands of underage people.”

He proposed a simple fix, one that takes the clear guidance of the DEA and hands it to state regulators as an action item: “What we would like to see is for more legal states to remove the word ‘seed’ from the definition of cannabis. This would allow legal growers in that state access to wider variety of genetics.”

Until then, one of the most important functions of the state-legal cannabis space remains handcuffed by regulatory language.

The result is a de-facto policy that underscores the prohibition-era culture of cannabis, even in the newly licensed landscape from coast to coast.

“Everybody knows that the cannabis marketplace is illegal,” Pennington said. “Not might be illegal. It is illegal. It’s quite profoundly unjust and outrageous that we’re in this state of affairs. Nobody really wants to talk about that, because that’s a really uncomfortable reality. State markets are premised on discrimination against interstate commerce.”

Will the DEA’s stance prod the industry to move toward a more open genetics market?

“It could, if people wanted transparency,” Pennington said. 

At CannaCon’s B2B events this year, exhibitors, including Elev8 Seeds, reportedly sold seeds on the expo floor at locations like the Greater Richmond Convention Center in Richmond, Va.—openly and under the aegis of the event itself. Those in-person events provide a platform for more detailed conversations about the product being sold. This is especially helpful in a nuanced transaction, as in the case of sourcing genetics that will form the backbone of a new company’s cultivation operation. Breeders can share practical information about the seeds and dial in a better understanding of what’s important to the grower.

But, as of late 2022, months after the DEA’s official determination was made public, those in-person examples are few and far between.

“The seed space is still fairly clandestine and cloak-and-dagger,” Grace said. “Some breeders in these spaces are doing great work, but it can be hard to distinguish the geniuses from the charlatans. Because there is still ambiguity in the state-federal legality, many breeders are still not professionalizing. Most, for example, are still not obtaining formal intellectual property protections on the genetics they produce. This has some benefits to other growers in the industry, but it also means that these breeders must constantly release new varieties. That means they can’t spend a lot of time or money improving a single variety. That’s why you see so much ‘pollen chucking’ activity in the space. With the DEA memo and hopefully future action from the states, I expect to see some breeders really step up their work and introduce higher quality seed. I’m especially bullish on high-quality stable hybrid seed. Over the next five years or so, I believe you will see some strong offerings in this category. I believe those offerings will revolutionize cannabis cultivation.”

Intellectual property protections on cannabis genetics remain in their infancy (due, again, in part, to the mixed federal positions on the legality of cannabis).

The 2023 Farm Bill may also provide more specific guidance on seed sales. While that federal legislation is aimed at honing agricultural policies, the bill is expected to fine-tune language around hemp cultivation—including the definition of what hemp is.

And that’s where this all began: with a procedural acknowledgement that cannabis seeds (whether they sprout into industrial hemp plants or THC-rich phenotypes of your cultivation team’s latest Sour Diesel crosses) ultimately fall under the definition of hemp. They are legal to distribute in the eyes of the federal government.

But the word “infancy” is important here. Commercial trends have not yet matured into any definitive statement on how the above-board cannabis seed market operates.

“I would say at this point that clones are still the bread and butter, but our retail seedling line has grown every year,” Grace said. “Commercially, seeds and seedlings are growing among outdoor cultivators, especially those growing for extract.”

Grace also offered words of advice for growers—both licensed rookie and licensed veteran alike.

“Assume nothing,” he said. “Know your source as well as you can, and try to work with reputable partners. Don’t put all your eggs in one basket. Get a number of genetics from different partners and trial them against each other.”

U.S. DEA Official Determination on the Legality of Cannabis Seeds by sandydocs on Scribd