Understanding the Legal Ambiguities in Payment Processing for the Cannabis Industry

The cannabis industry has exploded into a billion-dollar market that’s projected to be valued at over $197.74 billion by 2028. But that popularity doesn’t make life any easier for businesses selling cannabis products because there are still a lot of questions on whether cannabis should be sold on the market legally for recreational and medicinal purposes.

If you’re one of these businesses, you already realize how difficult it is to process payments when you’re tagged as a high-risk merchant.

There are also a lot of ambiguities with payment processing in this industry, which makes it harder for you to gain the trust of customers, especially when it comes to transactions and money management.

The Misconception About Cannabis Businesses

Here’s the truth: some cannabis businesses operate in a way that makes them look like they’re part of the black market. It is because there are still no clear transactional requirements for these types of businesses and there are also no proper rules on what is legal and what is not when it comes to processing payments for cannabis products.

This is why a lot of major credit card companies and payment processors choose to stay away from transactions relating to cannabis.

In fact, Visa issued a statement in December 2021 regarding the prohibition of the use of any Visa-branded products to buy cannabis goods. This caused quite a stir among cannabis businesses, especially since Visa is a huge financial institution with a lot of customers.

This has also forced a lot of cannabis operators to resort to “workaround” strategies just to keep their businesses afloat, many of which don’t realize that they’re already practicing federal banking fraud.

But while bigger financial institutions choose to stay away from cannabis-related businesses, there are legal payment methods like ACH payment processing that can process payments for your business without breaking any rule of law.

Aside from payment complications, a lot of financial institutions stay away from cannabis businesses due to the fear of federal regulators. The Patriot Act of 2001 requires financial institutions to not only learn about their customers but also their customers’ customers, something that a lot of these businesses don’t want to do. Although these regulations are also vague, financial institutions still fear breaking any rule of law and getting fined for it.

High-Risk Doesn’t Always Mean Illegal

Being tagged as a high-risk merchant is difficult, but there are a lot of legal alternative pathways for you to use like finding the right high-risk merchant account provider that can help you process transactions online without being burdened by very expensive fees that could take away from your profit.

Although the legalization of marijuana in the country is still up for debate, there’s a lot of hope that one day, cannabis businesses will be treated like any other business out there as long as they are following the law and avoiding black market practices which make it harder for them to thrive on the market.


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