Mastercard has recently issued instructions to U.S. financial institutions to cease allowing purchases of cannabis on its debit cards. This decision has resulted in cannabis businesses expressing concerns about increased risks of robbery and violent crime. Despite the legalization of marijuana for recreational or medical purposes in several states, federal law prohibits its sale, possession, and use in any form. As one of the largest payment processors globally, Mastercard states that purchases of cannabis are not allowed on its systems, even if customers are using their own cash accessed through bank cards and PINs.
In response to the criticism, a Mastercard spokesperson stated that they promptly investigated the matter and instructed financial institutions offering payment services to cannabis merchants to terminate such activity, aligning with their policies.
The inability of most major banks and credit card providers to work with marijuana businesses has forced them to primarily operate with cash, making them attractive targets for robberies, especially when transporting significant amounts of cash for deposit. Nonetheless, advocates for legalization believe that despite these difficulties, the cannabis industry continues to have a positive impact on local economies. According to Quartz, national sales could exceed $57 billion annually by 2030 in states where cannabis sales are permitted, with the estimated national forecast reaching over $72 billion when considering states poised to legalize it.
Criticism of Mastercard’s decision has come from cannabis companies, particularly due to concerns about safety. Small stores, lacking the financial resources to combat crime, may bear a disproportionate impact in terms of security expenses. Morgan Paxhia, co-founder of Poseidon Investment Management, expressed his perspective on the matter, pointing out that the federal government’s refusal to recognize cannabis as an industry is a painful example of regulatory barriers faced by the sector. Furthermore, Darren Weiss, the president of Verano, a multistate marijuana operator, highlighted the irony of the industry, which employs hundreds of thousands of people, stimulates the economy, and promotes alternatives to pharmaceuticals and vices, being treated as a pariah.
Paul Armentano, deputy director of NORML, emphasized the importance of access to banks for any industry to operate safely and effectively. Armentano called on Congress to amend federal policy to provide a secure environment for state-compliant cannabis businesses and their customers.
While the transition to cashless payments has presented challenges for the industry, some states have made progress in implementing cashless dispensary systems, such as Hawaii, which became the first state to adopt a cashless system using the CanPay payment app. Other states, including California and Colorado, have also implemented the app for cannabis transactions, as reported by The Associated Press.
Efforts are being made in Congress to address the issue of marijuana banking through the proposed Secure and Fair Enforcement Banking Act (SAFE Act). This act aims to legalize marijuana banking by ensuring that the proceeds of state-sanctioned marijuana businesses are not considered illegal under federal money laundering laws. The Senate Committee on Banking, Housing, and Urban Affairs held its first hearing on the SAFE Act in May. While concerns about potential loopholes in money-laundering laws were raised by the Justice Department, Senator Tim Scott, a former small business owner, emphasized the importance of a banking relationship in providing safety and stability for companies and their stakeholders.
In conclusion, Mastercard’s decision to halt cannabis purchases on its debit cards has raised concerns about safety and security in the cannabis industry. Advocates for legalization argue that the industry’s economic benefits justify the need for access to banking services. Efforts are underway in Congress to address the issue, notably through the proposed SAFE Act. Overall, a collaborative approach between government regulators and financial institutions is necessary to establish an enabling environment for the cannabis industry to operate safely and efficiently.
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