5 Things We Learned About the Seeds Market Since the DEA's Historic Announcement

Even as the industry continues to mature and develop more sophisticated systems for identifying, tracking and selling seeds, there’s still a lot of confusion about genetics, authenticity and quality.

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In January 2022, attorney Shane Pennington at Vicente Sederberg received a letter from the DEA that made waves in the industry: For the first time, the agency confirmed in writing that cannabis seeds below the 0.3% THC threshold set in the 2018 Farm Bill were legal and could be sold and shipped without criminal liability.

Since then, Pennington and others have been inundated with questions from growers, dispensaries and consumers about what they can and can’t do with regards to cannabis seeds and clones. In a recent Cannabis Business Times webinar, we discussed the topic with Pennington as well as Jay Wexler, a law professor at Boston University who teaches constitutional and cannabis law; Rick Campanella, CEO of the well-known Brothers Grimm Seeds; and Tom Wilson, a longtime cannabis breeder and owner of MoneyTree Genetics.

We distilled their lessons into five important things to know about the seeds and clones market and about operating in the cannabis industry in general.

1. Official legal guidance doesn’t only come from laws.

In the cannabis industry, there’s a huge focus on both existing and future legislation. Sweeping bills like the SAFE Banking Act attract headlines and attention, but panelists pointed out that laws aren’t the only way state and federal governments provide updates on the regulation and enforcement of hemp and cannabis.

“Agencies communicate with the regulated communities in various different ways, some more formal than others,” said Pennington, who pointed to his DEA letter response as an example. “For various reasons, they often just answer questions in less formal ways.”

These changes can cause substantial shifts in market trends. Campanella noted a significant increase in the purchase of seeds from the company’s website after the DEA letter. 

It seems like it has snowballed in the last year to where our traffic on our website has tripled or more,” said Campanella. “And there's a lot of home grower purchasers. … I'm sensing that there is more reception, more openness to receive or purchase seeds without feeling that they're doing something surreptitious.”

During the panel, Wexler expanded on things to watch for legal updates outside legislation itself. 

“You have to watch the federal agencies too. There are a lot of things to watch when you're monitoring what's the future of cannabis and the law,” said Wexler. “You're looking at the federal legislation, but you also have to look at what the federal agencies are doing and whether the Justice Department will get any of its act together to centralize or uniform.”

2. Cannabis businesses must balance offense and defense.

Many parallels have been made between sports and business. This holds true in almost every part of the cannabis industry, but especially for companies involved in buying or selling seeds or clones. It’s critical to find a balance between “offense”—more aggressive moves that can grow the business—and “defense”—taking steps to protect yourself from legal repercussions or other setbacks.

“There's probably a reluctance on the part of the bigger buyers to get their fingers slapped,” explained Campanella as he addressed the defensive mindset. “They’re perhaps a publicly traded company, they have a certain image that they want to keep.”

On the other hand, Wilson talked about how his company actually reached out to the police to let them know about his company’s plans to branch out into a segment of the industry with less regulation.

“We kind of invited local law enforcement in,” said Wilson. “Of course, we did our due diligence and we literally handed them a copy of the Pennington letter and all the verbiage from the Department of Agriculture. … [We] made it clear that ‘Hey, this isn’t our interpretation anymore.’” 

3. State-level lobbying and teamwork drives the most change.

While things may have slowed down a bit from the earliest days of the “Green Rush” in the cannabis industry, there’s still lots of companies jumping in to carve out their own niche and take control of a marketplace. Combine these circumstances with the limited-license model used in most states, and you have a recipe for intense competition. 

But during our panel, Pennington pointed out that in a quasi-legal industry like cannabis, it can benefit everyone if companies work together to advocate for local change.

“There’s a reason why most industries have organizations that coordinate their interests and represent them in front of various regulators,” said Pennington. “Folks who have businesses should start getting plugged in and thinking ‘Yeah, we're competitors, me and you out there in the market, but maybe when it comes to the regulations that govern us, we should start working together more.’”

Wexler agreed, pointing out that the slow pace of federal cannabis legislation likely means companies will have to focus their efforts on state laws.

“I don't think we're going to see much at the federal level,” explained Wexler. “We'll see some more conversation about some of the more comprehensive federal legislation, but I don't think that that's going anywhere.”

4. Growers and sellers should focus on authenticity first.

Even as the industry continues to mature and develop more sophisticated systems for identifying, tracking and selling seeds and plant substance, there’s still a lot of confusion about genetics, authenticity and quality. With the prevalence of the legacy market and its less-than-reliable methods of measuring these characteristics, it’s even more important for both retailers and wholesalers to have confidence that their products are legitimate.

“Clearly this is the disconnect between dispensaries and the black market,” said Wilson. “There’s a lot of people that would rather spend their money on the black market for a particular strain or from a cultivator line that they’re familiar with, rather than the dispensary.”  

Campanella said his company experiences this issue selling to growers and wholesalers as well.

“When they buy a quantity of those seeds, they want them all to grow into plants that are very similar and very much as described on the package,” he said. “If they don’t turn out like that, then what are you really selling? Something that’s not what you’re advertising.”

5. Education is key for all businesses and consumers.

Given the dynamic nature of cannabis laws and the importance of the end product to consumers’ health, all of our panelists agreed that companies who take an active approach to education have an advantage.

“I'm not looking to push sales into people. I don't want people to take things home and have bad experiences,” said Wilson. “I want everybody to have the most successful experience as they can. So doing the research and knowing the laws, coming in here with as much knowledge as possible is always best. … ‘Do your homework’ is what I pretty much tell all my growers.”

Pennington said both understanding and creating change in laws related to cannabis are much less complex than you might think. 

“I’ve learned from this seed letter thing,” he concluded. “It was super easy to get that determination. … I just would tell everyone that there are lots of things that are possible if you engage in the administrative process. … There are ways to move the boulder up and over the mountain, to move the mountain, to go under, around, through the mountain, anything.”

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