Business
Mastercard Announces Ban On Debit Card Transactions For Weed Purchases
Payment processor Mastercard has directed financial institutions to stop allowing debit card transactions for weed purchases.
Payment processing powerhouse Mastercard this week revealed the company is taking steps to prevent PIN-based debit card transactions for marijuana purchases, dealing a blow to a regulated cannabis industry already struggling with limited payment options for consumers.
On Wednesday, Bloomberg reported that Mastercard, the world’s second-largest payment solutions provider, had informed financial institutions and other payment processors to stop allowing marijuana purchases to be processed with debit cards. Because of tight federal restrictions on banks that do business with marijuana companies, even those legal under state law, most financial institutions decline to provide common banking services including credit card processing to such businesses.
In a statement, a spokesman for Mastercard said that the action was taken after it learned that cannabis dispensaries were accepting debit cards for pot purchases.
“As we were made aware of this matter, we quickly investigated it,” the spokesman said. “In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connect them to Mastercard to terminate the activity.”
“The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems,” the Mastercard spokesperson added.
Dispensaries Look For New Solutions
As Mastercard’s shutdown of debit card purchases for weed began to take hold last week, cannabis dispensaries that had been using the process began to look for new payment solutions. Peter Su, director of specialty banking at Hanover Bank, has headed cannabis banking programs and served as a payment processing consultant for the industry. He said that he began fielding calls about the situation last week and is hearing from even more companies this week.
“My phones are ringing off the hook — people are asking for payment alternatives,” Su said.
Last year, some of the largest processors of ATM transactions, such as NCR Corp.’s Columbus Data Services, shut down another payment processing system popular with dispensaries known as cashless ATMs that let consumers use their debit card to process a cash withdrawal, which would then be used to pay for cannabis. Tyler Beuerlein, chief strategic business development officer of Safe Harbor Financial Services, a company that provides banking and lending to cannabis businesses, said the crackdown on electronic payment options leaves few alternatives for licensed marijuana retailers to conduct business with their customers.
“More people have migrated to PIN debit in the last year and a half as the cashless ATMs have had issues. If the PIN debit solutions go away, it leaves people back with ACH or cash,” said Beuerlein.
But many consumers consider ACH (automated clearing house) payments, which require purchasers to share their bank account and routing number with the dispensary, to be cumbersome and potentially risky. And cannabis operators would prefer to limit the transactions conducted in cash, which can leave retailers open to robbery and other theft.
Industry Seeks Legislative Solution
A proposed federal legislative solution, the Secure and Fair Enforcement (SAFE) Banking Act, would give cannabis companies legal access to traditional business banking services including credit card processing. But while the bill has bipartisan support in both chambers of Congress and has been approved by the House of Representatives on seven separate occasions, it has yet to receive a vote in the U.S. Senate.
Matt Darin, the CEO of Curaleaf, one of the world’s largest cannabis companies by revenue, said that the news about Mastercard’s crackdown on debit transactions for cannabis purchases “illustrates once again the urgent need for the federal government to recognize the cannabis industry as the tax-paying, job-providing sector that it is.”
“Our industry is one of the fastest-growing sectors in the U.S., generating more than $3.7 billion in state tax revenue in 2022 and employing over 428,000 Americans,” Darin wrote in an email to High Times. “Furthermore, cannabis is legal for medical purposes in 40 states, for recreational purposes in 23 states, and an overwhelming 88% of Americans say that cannabis should be legalized across the country. When will the laws catch up?”
New Mexico regulators fined a cannabis operator nearly $300,000 and revoked its license after the company allegedly created fake reports in the state’s traceability software.
The New Mexico Cannabis Control Division (CCD) accused marijuana manufacturer and retailer Golden Roots of 11 violations, according to Albuquerque Business First.
Golden Roots operates the The Cannabis Revolution Dispensary.
The majority of the violations are related to the Albuquerque company’s improper use of BioTrack, which has been New Mexico’s track-and-trace vendor since 2015.
The CCD alleges Golden Roots reported marijuana production only two months after it had received its vertically integrated license, according to Albuquerque Business First.
Because cannabis takes longer than two months to be cultivated, the CCD was suspicious of the report.
After inspecting the company’s premises, the CCD alleged Golden Roots reported cultivation, transportation and sales in BioTrack but wasn’t able to provide officers who inspected the site evidence that the operator was cultivating cannabis.
In April, the CCD revoked Golden Roots’ license and issued a $10,000 fine, according to the news outlet.
The company requested a hearing, which the regulator scheduled for Sept. 1.
At the hearing, the CCD testified that the company’s dried-cannabis weights in BioTrack were suspicious because they didn’t seem to accurately reflect how much weight marijuana loses as it dries.
Company employees also poorly accounted for why they were making adjustments in the system of up to 24 pounds of cannabis, making comments such as “bad” or “mistake” in the software, Albuquerque Business First reported.
Golden Roots was fined $298,972.05 – the amount regulators allege the company made selling products that weren’t properly accounted for in BioTrack.
The CCD has been cracking down on cannabis operators accused of selling products procured from out-of-state or not grown legally:
- Regulators alleged in August that Albuquerque dispensary Sawmill Sweet Leaf sold out-of-state products and didn’t have a license for extraction.
- Paradise Exotics Distro lost its license in July after regulators alleged the company sold products made in California.
Golden Roots was the first alleged rulebreaker in New Mexico to be asked to pay a large fine.
Source: https://mjbizdaily.com/new-mexico-cannabis-operator-fined-loses-license-for-alleged-biotrack-fraud/
Four marijuana companies, including a multistate operator, have filed a lawsuit against U.S. Attorney General Merrick Garland in which they allege the federal MJ prohibition under the Controlled Substances Act is no longer constitutional.
According to the complaint, filed Thursday in U.S. District Court in Massachusetts, retailer Canna Provisions, Treevit delivery service CEO Gyasi Sellers, cultivator Wiseacre Farm and MSO Verano Holdings Corp. are all harmed by “the federal government’s unconstitutional ban on cultivating, manufacturing, distributing, or possessing intrastate marijuana.”
Verano is headquartered in Chicago but has operations in Massachusetts; the other three operators are based in Massachusetts.
The lawsuit seeks a ruling that the “Controlled Substances Act is unconstitutional as applied to the intrastate cultivation, manufacture, possession, and distribution of marijuana pursuant to state law.”
The companies want the case to go before the U.S. Supreme Court.
They hired prominent law firm Boies Schiller Flexner to represent them.
The New York-based firm’s principal is David Boies, whose former clients include Microsoft, former presidential candidate Al Gore and Elizabeth Holmes’ disgraced startup Theranos.
Similar challenges to the federal Controlled Substances Act (CSA) have failed.
One such challenge led to a landmark Supreme Court decision in 2005.
In Gonzalez vs. Raich, the highest court in the United States ruled in a 6-3 decision that the commerce clause of the U.S. Constitution gave Congress the power to outlaw marijuana federally, even though state laws allow the cultivation and sale of cannabis.
In the 18 years since that ruling, 23 states and the District of Columbia have legalized adult-use marijuana and the federal government has allowed a multibillion-dollar cannabis industry to thrive.
Since both Congress and the U.S. Department of Justice, currently headed by Garland, have declined to intervene in state-licensed marijuana markets, the key facts that led to the Supreme Court’s 2005 ruling “no longer apply,” Boies said in a statement Thursday.
“The Supreme Court has since made clear that the federal government lacks the authority to regulate purely intrastate commerce,” Boies said.
“Moreover, the facts on which those precedents are based are no longer true.”
Verano President Darren Weiss said in a statement the company is “prepared to bring this case all the way to the Supreme Court in order to align federal law with how Congress has acted for years.”
While the Biden administration’s push to reschedule marijuana would help solve marijuana operators’ federal tax woes, neither rescheduling nor modest Congressional reforms such as the SAFER Banking Act “solve the fundamental issue,” Weiss added.
“The application of the CSA to lawful state-run cannabis business is an unconstitutional overreach on state sovereignty that has led to decades of harm, failed businesses, lost jobs, and unsafe working conditions.”
Alabama regulators are targeting Dec. 1 to award the first batch of medical cannabis business licenses after the agency’s first two attempts were scrapped because of scoring errors and litigation.
The first licenses will be awarded to individual cultivators, delivery providers, processors, dispensaries and state testing labs, according to the Alabama Medical Cannabis Commission (AMCC).
Then, on Dec. 12, the AMCC will award licenses for vertically integrated operations, a designation set primarily for multistate operators.
Licenses are expected to be handed out 28 days after they have been awarded, so MMJ production could begin in early January, according to the Alabama Daily News.
That means MMJ products could be available for patients around early March, an AMCC spokesperson told the media outlet.
Regulators initially awarded 21 business licenses in June, only to void them after applicants alleged inconsistencies with how the applications were scored.
Then, in August, the state awarded 24 different licenses – 19 went to June recipients – only to reverse themselves again and scratch those licenses after spurned applicants filed lawsuits.
A state judge dismissed a lawsuit filed by Chicago-based MSO Verano Holdings Corp., but another lawsuit is pending.
Source: https://mjbizdaily.com/alabama-plans-to-award-medical-cannabis-licenses-dec-1/
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