The 'immaculate conception' problem: Maryland medical marijuana growers must break law to grow plants
By Erin Cox from The Baltimore Sun
Maryland's would-be medical marijuana growers face a conundrum known as the "immaculate conception" problem: How do you grow legal marijuana plants when it's a felony to obtain the seeds?
The first step in growing state-sanctioned legal marijuana is to break the law, a paradox that has regulators nationwide looking the other way while growers keep mum about how they start their businesses.
"It's a bizarre little legal problem that no one addresses," said Leah Heise, an attorney and CEO of the national advocacy group Women Grow. "States just turn a blind eye to it, and thus far, the federal government has turned a blind eye to the sprouting up of these plants."
In Maryland and nearly all states that have legalized some use of marijuana, setting up a growing operation involves a state and federal crime. Without exception, moving seeds or young plants — known as clones — across state lines is a felony. Even in states where recreational marijuana is now legal, the medical marijuana plants that fed its precursor industry originally came from illegal sources, industry experts said.
"If you're going to open up a business growing in a state where marijuana was illegal, where are you going to get those plants?" Heise said.
The same dynamic that ushered in medical marijuana programs in more than two dozen states are now at play in Maryland, where 15 companies that secured pre-approval to grow the drug are in the process of obtaining final licenses to get up and running.
When it comes to planting the first crop, licensed growers have a culture of silence. Regulators have a don't-ask, don't-tell policy.
"It's the kind of thing that's just not acknowledged," said the CEO of a national company with growing operations in other states, who asked for anonymity because of the crime involved in getting the seeds. "It's a tricky situation. That's the No. 1 no-no that you're taught: Don't say where your genetics are coming from."
Several Maryland companies with pending growing licenses contacted by The Baltimore Sun declined to be interviewed about how they would get their plants started. Maryland growers could receive final approval from regulators within six months, unless one of several court challenges contesting preliminary license approvals prevents it.
Dozens of websites offer seeds or cuttings from plants grown abroad that can be discreetly — and illegally— mailed to companies. Patent laws don't protect marijuana breeds developed by other growers, and growers can theoretically move clippings across state lines without retribution — so long as they don't get caught, attorneys said.
"There's a big market right now," said one cannabis attorney who declined to speak on the record about how to get illegal plants. "You could go online and buy seeds from the Netherlands, and have them shipped to your house and you could probably get away with it. That's happening all the time."
Even in states where marijuana is legal for recreational use, initially obtaining plants can be a crime.
In Washington D.C., it's legal to grow and smoke marijuana at home but a crime to buy or sell seeds and plants.
But it is not a crime to give away a small amount of seeds. So last year, advocates who helped pass D.C.'s recreational marijuana law set up a free "seed swap" to give away thousands of seeds to help hundreds of people launch their own legal crops.
Darren Weiss, a Baltimore corporate attorney with a cannabis law practice, has several Maryland clients seeking medical marijuana licenses. He said once the plants are in a legal grow operation, they're legal under state law. But to start, he can't offer any legal advice on how to go about an illicit activity.
"No ethical lawyer can," Weiss said. "What I'm advising my clients is: 'This is on you. I can't advise. I don't want to know how it happens.' "
Maryland's Medical Cannabis Commission has not issued guidance on this point either, chairman Paul Davies said. No state regulations ask growers to disclose how they got started. The state law legalizing marijuana is silent on that point.
The problem is the first of many unavoidable tensions encountered by marijuana operations legal under state laws but illegal under federal ones.
The normal tax exemptions that allow companies to deduct business expenses do not apply to cannabis outfits, whose revenue is a violation of federal drug law. Even seemingly mundane federal laws about workplace safety conflict with marijuana businesses legalized by states.
"There's tons of them when you think about it," Heise said. "Any time you're supposed to comply with a federal law, like OSHA, you're committing a felony under federal law."
Traditional banks often see the businesses as too risky for investment. Federal law still treats marijuana like heroin, and U.S. prosecutors could choose to seize assets of any marijuana business.
In California, where voters legalized recreational marijuana in November, companies willing to loan to marijuana entrepreneurs can demand 10 percent interest and huge equity stakes.
Donald J. Trump's election as president caused uncertainty in the cannabis community about whether his Department of Justice would continue to turn a blind eye.
Under the Obama administration, the Department of Justice in 2013 issued memos telling federal prosecutors that going after pot operations that were legal under state laws wasn't a top priority.
By now, more than half of America's population live in states with legal marijuana. Twenty-eight states and the District of Columbia have legalized some form of the drug for medical use.
But since the drug remains a federally scheduled substance, a new attorney general could begin prosecuting companies and patients by issuing new guidelines.
Trump has said he supports medical marijuana for sick patients, and last October told a crowd in Nevada that he thinks full legalization should be a state-by-state issue. The position of Trump's nominee for attorney general, Alabama Sen. Jeff Sessions, is less clear.
The conflicts with federal law create opportunities for other businesses, said Shad B. Ewart, who teaches a course on cannabis entrepreneurship at Anne Arundel Community College.
"I compare this to the gold rush," Ewart said. "The people who made the money weren't the people who found the gold nuggets. It was the people who sold the picks and shovels."
This new industry, for example, provides opportunities for cannabis security companies to protect businesses dealing with large amounts of cash or gardening companies to supply indoor, year-round growing operations.
Ewart advises his students to invest in these peripheral businesses that won't evaporate if there's a shift in federal policy.
"If the cannabis part goes away, you still have a business," he said.
Tags: Cannabis Collections, Cannabis, Collections, Accounts Receivable, Accounts, Receivable, A/R, AR, Cannabis Accounts Receivable, Cannabis Debt Collection, Debt Collection