Mastercard recently told financial institutions to stop allowing marijuana transactions on its debit cards. This news deals yet another blow to the cannabis industry that is already struggling with the financial system in the U.S.
Most banks in the country don’t serve cannabis companies since marijuana remains illegal at the federal level. Despite both medical and recreational cannabis being legalized in several states, many of these brands struggle to find a bank to help with their business needs.
Cannabis Businesses and Consumers Getting Left Behind
“Until we have changes at the federal level, cannabis businesses will continue to be left without access to traditional financial resources and be subject to devastating blows like this,” Patrick O’Boyle, CEO of Dama Financial, said. “Currently, credit card networks do not allow merchants to use their card products for cannabis purchases. The card networks continue to shut the card/account down if they identify anyone in violation of policy since cannabis is still federally illegal.”
The cannabis industry has made strides in compliance, reputation, and improved consumer experience, but no business can thrive in these ever-changing conditions. According to O’Boyle, by hindering the customer experience and making it even more difficult for business owners to operate day-to-day, actions like this unintentionally create an environment that further encourages increased crime and illicit sales.
Failure to Recognize State Regulated Legal Cannabis
“It’s frustrating that there are inadequate and expensive banking solutions available for regulated cannabis businesses,” Artie Minson, CEO of LeafLink, said. “Despite the cannabis industry contributing billions of dollars to the economy, it is difficult to find a bank that is both friendly and cost-effective for these businesses to use. As one of the fastest-growing industries in the US, we desperately need federal reform and reliable, cost-effective banking solutions, which LeafLink and our peers are actively pursuing.”
Morgan Paxhia, Co-Founder and Managing Director at Poseidon & AdvisorShares Poseidon Dynamic Cannabis ETF, says this action by Mastercard is a direct result of the failure of the Federal Government’s unwillingness to recognize state regulated legal cannabis.
“Who’s to blame for Mastercard’s move to issue cease and desist letters to payment processors allowing pin debit of cannabis transactions — the Federal Government. Legal cannabis deserves to be treated like every other business in this country, and ten years later, we have no support from the Federal Government and Mastercard retrenching,” Paxhia said.
Crucial Legislation for the Cannabis Industry
The SAFE Banking Act could help bridge the gap between banks and cannabis businesses. Reintroduced in both houses of Congress earlier this year, the SAFE Banking Act has passed the House of Representatives several times, only to fail in the Senate.
“With the stalling of the SAFE Banking Act in Congress, and now this Mastercard roadblock, it becomes increasingly apparent that something has to be done on the federal level to lift these constraints,” Wendy Bronfein, Co-Founder of Curio Wellness, said. “The cannabis industry needs partners who help us move forward with banking, the removal of 280e, and safe and secure payments.”
“To date, our elected federal leaders have been unable to advance the SAFE Banking Act, which would be the first step towards harmonizing state and federal law and provide guidance to financial institutions on how to engage in one of America’s fastest growing industries. Hopefully this is a wake up call that action is needed,” Brady Cobb, CEO of Sunburn Cannabis, said.
One of the Fastest Growing Sectors Needs Banking Services
The cannabis 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, according to Matt Darin, CEO of Curaleaf. 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?
“Current prohibitions on banking in cannabis are unfair to communities, law enforcement, cannabis workers, and business owners. To create a thriving, and above all, safe and legal cannabis industry, the passage of SAFE and continued fight against the cannabis stigma are critical,” Darin said.