Mastercard No Longer Allowing Cannabis Purchases on Debit Cards

Cannabis and cash—and often robberies—have become synonymous in legalized retail scenes throughout the country, and now another major financial service provider is attempting to keep it that way.

Mastercard Inc., plugging itself as the second-largest payment-processing corporation on the planet, warned payment firms and financial institutions last week to cease allowing state-legal cannabis transactions on its debit cards, Bloomberg first reported July 26.

“In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connects them to Mastercard to terminate the activity,” a spokesperson for the company told the news outlet Wednesday.

Wendy Bronfein, co-founder of vertically integrated Maryland operator Curio Wellness, called the news "extremely disappointing" but said in a statement provide to Cannabis Business Times that it does not come as a surprise.

"The cannabis industry notoriously lacks access to traditional financial resources," she said. "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. The cannabis industry needs partners who help us move forward with banking, removal of 280E, and safe and secure payments. Ultimately, the only way financial institutions are going to be comfortable working with us is by getting the OK from the federal government."

Darren Weiss, president at Chicago-based multistate operator Verano Holdings, reacted to this news Wednesday on social media.

“Never ceases to amaze me that an industry that employs hundreds of thousands of people, provides billions in economic benefits, and promotes safer alternatives to pharmaceuticals and commonplace vices continues to be treated like a pariah,” he tweeted.

The cease-and-desist letter from Mastercard to various payment firms comes at a time when much of cannabis industry continues to hurt amidst the absence of safe banking access. Despite the U.S. House passing the Secure and Fair Enforcement (SAFE) Banking Act seven times since 2019, politics continue to hamper policy in the Senate.

RELATED: SAFE Banking Backed by At Least 9 GOP Senators; Bill Lies Largely in Democrats’ Court

Since cannabis remains classified as a Schedule I drug under the federal Controlled Substances Act, the industry does not have traditional access to banking, forcing dispensaries to operate primarily in cash without the ability to accept transactions on credit or debit. This often leaves cannabis retailers as a target for armed robbery and theft.

In an attempt to take the cash bull’s-eye off their backs, many cannabis dispensaries have turned to “cashless” ATMs, a point-of-sale transaction that allows budtenders, for example, to round a $55 order up to $60 and give the customer $5 back in cash. This masquerades the transaction as an ATM withdrawal rather than a cannabis purchase by mimicking standalone ATMs through a miscoded cash disbursement.

Other dispensaries have employed third-party platforms to allow cannabis customers to use credit for their purchases. In March 2022, Massachusetts-based Dreamer Cannabis began utilizing this payment channel as a workaround of policies in place by most banks and major credit card agencies that ban these transactions.

“Instead of swiping the card at a terminal, we send them a text message on their phone. They enter their name and credit card information [and] hit pay,” Dreamer co-owner Kevin Perrier said at the time.

Similarly, Mary Mart, a family-owned and operated adult-use retailer in Tacoma, Wash., launched the contactless, cash-free AeroPay payment platform in April 2022 at its dispensary following the death of a male worker at a different dispensary in Tacoma, who was fatally shot during an attempted robbery involving a pair of teenage suspects. The alternative payment system allows customers to create an AeroPay account online and link their bank account to start paying with their phones.

But these third-party payment platforms, as well as the cashless ATMs, have become problematic in the eyes of big banks that don’t want to take on the risk of servicing a federally illegal industry without clarity from lawmakers in Washington. Visa also warned its customers via a compliance memo in December 2021 that cashless ATMs went against its company policy and must stop.

Mastercard’s latest warning comes at a time when U.S. cannabis sales are projected to reach nearly $30 billion in 2023, and $45 billion in 2027, according to Colorado-based industry intelligence provider BDSA’s most recent five-year rolling market forecast.