Business from cannabis is growing fast in Florida; some of it regulated tightly, and some of it without rules. But all of it comes with cash that the banking industry is reluctant to touch.
The first legal industrial hemp seeds in decades are growing now in South Florida soil.
CBD is showing up in ice cream, gummy bears and cocktails, but the state says the products are illegal.
And millions of dollars are being generated by the medical marijuana industry in Florida, but few banks want the money.
In a field in Homestead earlier this month, the first legal industrial hemp seeds in 70 years were put into the South Florida soil. "This is a big milestone for the U.S. hemp program," says Zack Byrm who runs the University of Florida Tropical Research and Education Center, which is growing the plants.
Getting to planting day wasn't easy. Last year the Florida Legislature gave the green light to UF to begin experimenting with industrial hemp. It took a year between getting the approval for the pilot program and researchers planting industrial hemp. This was before lawmakers okayed a permanent industrial hemp program during the just completed Legislative session.
Researchers had to secure all the permits, erect construction fencing around the fields and then plant the seeds.
Both hemp and marijuana come from the same cannabis plant family. What separates them is how much of the THC chemical they have. THC is what produces the high in marijuana. Plants that have more than .3 percent THC content are considered marijuana. Anything under that is considered hemp and the only way to determine which side of the line a particular plant falls into is by chemical testing. That's why it's so hard on regulations.
Florida Commission of Agriculture Nikki Fried thinks industrial hemp could be a $20 to $30 billion market in a decade.
In Homestead, researchers planted eight varieties of hemp. "We should get a good representation of which varieties do well and how well they do," says Will Wadlington with UF's Everglades Research and Education Center. Growing good hemp relies on the length of day and when a plant flowers. "What we're doing with the timing study is planting hemp from different latitudes like South China. We have some from Canada and from Europe also," says Wadlington.
One of the challenges of growing hemp is that some of the plants might "run hot." They might cross the legal threshold for hemp and turn into marijuana, which is not legal under the permits. The UF researchers are required to test their plants at harvest, not just for regulatory reasons, but for scientific purposes, too. If they have too much THC to be considered hemp, they will have to be destroyed.
The pilot project will be a bit of trial and error at first, while researchers develop guidelines that would-be hemp farmers can follow. Overall, it means it could take a bit for the research to catch up to the enthusiasm behind the fledgling industry.
"We do know that sneaky people have been growing marijuana in Florida for awhile," Wadlington says, "and people like the Sinaloa cartel in Mexico is at the same latitude. We are certain that cannabis the plant can grow here."
CBD is not regulated in Florida, but the number and types of products with CBD in them has exploded in Florida in recent months. The chemical CBD comes from the cannabis plant.
This legal grey area has not stopped Arby Barroso and Laura Baldwin Fuentes. They two co-founded CBD product maker Green Roads. It started in Davie, has a marketing team in Doral and is moving into a new headquarters in Deerfield Beach.
Customers include doctor offices, smoke shops and pharmacies. Large drugstore chains such as CVS, Walgreens and Rite Aid expect to start selling CBD products at select locations. Barroso says the big box business of CBD is tricky for Green Roads because if the hemp supply was diverted to big box stores that could mean smaller shops -- the foundation for the current CBD industry -- could be left without product. The laws around the industry are changing quickly and encouraging more farmers to enter the hemp market, but not fast enough to keep up with the demand for CBD products.
The company is trying to stay ahead of would-be regulations that could be coming down the pipeline, by modeling its practices on other parts of the dietary supplements industry.
"You always have to be thinking of what should happen? What do other industries have that this industry is going to need," says Barroso. "In an unregulated market, you know that sooner or later regulations are going to come in. So what will those regulations look like?"
Green Roads has been growing fast. In 2015, the company sold about $400,000 worth of CBD products. It expects revenues of over $80 million this year, according to Fuentes. And they hope more of that money can stay in Florida as the state looks to grow the source of CBD -- the hemp plant.
"We are both Floridian natives from Hialeah," says Baldwin Fuentes. "We're really happy to bring jobs to the state. We want to bring farming back to the state. We're really looking at helping Florida become more of an economic powerhouse."
CBD products are expected to be a $1 billion market in three years. Florida’s agriculture commissioner thinks the state’s industrial hemp market could bring in more than $20 billion in a decade. Already, the sale of medical marijuana products is generating billions of dollars each year. And the legal sale of medical marijuana edibles could begin soon.
So what to do with all that money? Most banks are not interested in touching any cash that touches cannabis, but not First Federal Bank. It started as a small savings and loan bank in 1962 in Live Oak, Florida. The bank offered its first checking account in the 1980s.
Today, First Federal is headquartered in Lake City and five months ago it began banking cannabis money. That about the same time John Medina took over as president of the bank.
"We recognize that it was a grossly underserved market and frankly a very dangerous market for the growers and the licensees having to manage large sums of cash (that) in many cases is being carried in trunks of cars and in backpacks," Medina says.
The bank's first cannabis customers were from California, but Medina insists the money in the bank from California isn't directly from selling marijuana. Instead, the California money has been generated by companies there selling parts of themselves to raise money.
But in Florida, First Federal is banking business generated directly from the seed. "Any time that you have the actual product and you have cash involved, that's really what requires the heightened regulatory standards."
Since marijuana remains illegal according to federal law, businesses have had difficulty finding financial services. Nationally, fewer than 400 banks provide services to marijuana related businesses, according to the U.S. Treasury Department's Financial Crimes Enforcement Network. There are more than 4,000 banks in the U.S.
"While we feel relatively comfortable that the Department of Justice is not going to come knocking at our doors, we need guidance from Congress," says Medina.
As the cannabis industry grows beyond medical marijuana in Florida with industrial hemp and possibly CBD regulation, Medina says his bank is preparing for that business.
But First Federal isn't loaning money to the cannabis industry, at least not directly. "We are lending to individuals, [such as] the employees that work for them." The bank is comfortable making mortgage and auto loans to cannabis workers, but not to their employers.
"In the state of Florida every dispensary and every grower is currently paying real estate taxes on the property, they're paying utilities for the buildings that they're in. Technically, all of those payments are coming from the cannabis industry. All we're trying to do is create a safe environment for these companies to operate under."