Taxing & Zapping Marijuana: Blockchain Compliance in the Trump Administration Part 3

15 Pages Posted: 28 Aug 2018

See all articles by Richard Thompson Ainsworth

Richard Thompson Ainsworth

NYU - Graduate Tax Program; Boston University - School of Law

Brendan Magauran


Date Written: August 27, 2018


This is the third of a five-part series dealing with the rescission by U.S. Attorney General Jeff Sessions of the Obama-era policy that discouraged federal prosecutors from bringing charges in all but the most serious marijuana cases.

This article focuses on cyber-attacks on the main commercial chain, and the use of a private blockchain using HyperLedger Fabric as a platform.

This fraud is a direct, criminal attack; an attack designed to destroy/corrupt records of marijuana inventory and plant tags throughout the supply chain. The attack allows legalized marijuana to escape the system and be sold on the black market. A large-scale cyber-attack impacts every commercial enterprise, transporter, and testing laboratory. Control collapses.

Hacking a major track and trace system is not merely a theoretical possibility. It happened to the largest (and oldest) system. Hackers took down MJ Freeway’s Leaf Data System nationwide. The seriousness of this hack was all too apparent to the government of Nevada which notified MJ Freeway on September 12, 2017 that, because of vulnerabilities in its system, the State was terminating its five-year contract (after less than two-years) effective November 1, 2017.

Cyber-attacks aimed at destroying reliable data in a commercial chain have a lot in common with VAT frauds that rely on obscuring transaction data behind rows of false “buffer” entities. Both are defeated by systems that lay bare and preserve highly trustworthy, real-time data about the intra-entity transactions within the commercial chain. AI has become very good at risk-analyzing these data flows, and blockchain has become very good at preserving the data flows for AI analysis.

It is axiomatic that wherever distributive ledgers are adopted, they will replace centralized ledgers. The MJ Freeway system is precisely this kind of multiple-redundant centralized ledger system that will be/should be disrupted (replaced) by a blockchain. A private, rather than a public blockchain is proposed to store the data that is transferred in the commercial production of legalized marijuana.

Keywords: TAT, STS, Track and Trace, Seed to sale, Cyber Attacks, MJ Freeway, LeafData System, Legalized marijuana, Controlled Substances Act, Bank Secrecy Act, BSA, CSA, HyperLedger Fabric, Private blockchain, Artificial Intelligence, AI

Suggested Citation

Ainsworth, Richard Thompson and Magauran, Brendan, Taxing & Zapping Marijuana: Blockchain Compliance in the Trump Administration Part 3 (August 27, 2018). Boston Univ. School of Law, Law and Economics Research Paper No. 18-03. Available at SSRN: or

Richard Thompson Ainsworth (Contact Author)

NYU - Graduate Tax Program ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Boston University - School of Law ( email )

765 Commonwealth Avenue
Boston, MA 02215
United States

Brendan Magauran

Independent ( email )

No Address Available

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