Puff, Puff, Can’t Pay Your Cannabis Payments with Mastercard
Mastercard has issued a memo instructing financial institutions and payment processors to disallow cannabis payments on its debit cards, igniting a debate all over the U.S.
- Despite being legal for medical or recreational use in several states, cannabis remains federally illegal.
- Mastercard’s crackdown on cannabis payments came after it discovered that some shops were accepting debit payments for cannabis, despite the federal ban.
On July 26th, Mastercard, one of the world’s leading financial payment companies, sent a memo to financial institutions and payment processors, instructing them to stop allowing cannabis payments on its debit cards.
This move has sparked controversy, with advocates calling for new laws to ease sales of legal cannabis.
Despite cannabis being legal for medical use in 38 states and recreational use in 23 states, it remains federally illegal, making it challenging for dispensaries to conduct transactions through mainstream financial channels. However, due to its federal illegality, most banks refrain from servicing cannabis companies, leaving them with limited options for conducting financial transactions. This leaves businesses high and dry.
Mastercard’s decision regarding cannabis payments came after it discovered that some shops were accepting debit cannabis payments despite the federal ban. A spokesperson for the company stated, “The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems.” This crackdown specifically aims to prevent marijuana dispensaries from offering debit card payments with the use of a PIN number.
Mastercard’s move on cannabis payments has significant implications for the legal cannabis industry in the US. As the lack of access to debit card transactions has forced customers to rely primarily on cash for purchases. This reliance on cash transactions can be inconvenient and potentially risky for both dispensaries and customers, as cash poses security and accountability challenges.
In recent years, the banking industry has been reluctant to support cannabis payments due to the drug’s federal illegality and concerns about potential risks related to money laundering and fraud. This lack of banking support has left the cannabis industry grappling with limited financial options, hindering its growth and development.
Brady Cobb, CEO of Sunburn Cannabis, criticized Mastercard’s decision, stating “This move is another blow to the state-legal cannabis industry and patients/consumers who want to access this budding category.” Meanwhile, pot firm Verano’s President, Darren Weiss, reassured the public that they “will continue to advocate for cannabis reform in Washington through further dialogue with elected officials and stakeholders to advance conversations supporting the growth of safe, legal cannabis across the US.”
Speaking of elected officials, the Democrat-controlled US Senate has been working towards passing the SAFE Banking Act, which aims to make it easier for cannabis businesses to interact with financial institutions. However, the path to passing such legislation has not been without obstacles, as some top Republican Senators, like John Cornyn, have expressed skepticism and described it as “wishful thinking.” Well, that’s one way to nib it in the bud.
While smaller, regional banks may still serve cannabis companies, larger institutions and credit-card networks like Mastercard and Visa remain cautious about engaging in weed-related transactions. This might inadvertently push the over 52 million cannabis US users into the arms of fintech, forgoing legacy payment institutions. In other news, Inside Telecom asked a number of cannabis users and we were told to chill.
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