Mastercard instructed U.S. financial institutions this week to stop allowing purchases of cannabis on its debit cards, stripping customers of a convenient way to purchase marijuana without cash. Cannabis businesses say the decision will increase the risk of robbery and violent crime.
Because federal law prohibits the sale, possession and use of marijuana in all its forms, Mastercard said that purchases were not allowed on its systems, even when customers use bank cards and PINs to access their own cash to buy cannabis in states where the drug is legal for recreational or medical reasons.
“As we were made aware of this matter, we quickly investigated it,” a spokesman for Mastercard, one of the world’s largest payment processors, said in a statement on Friday. “In accordance with our policies, we instructed the financial institutions that offer payments services to cannabis merchants and connects them to Mastercard to terminate the activity.”
Medical marijuana is legal in 38 states, three territories and the District of Columbia. Recreational use of the drug is legal in 23 states, two territories and the District of Columbia.
Because most big banks and credit card providers will not work with marijuana businesses, many operate by cash only, making them targets for a growing number of robberies, particularly when transporting large amounts of cash for deposit.
Despite the hurdles with banks, the cannabis boom continues to help local economies thrive, proponents of legalization say. National sales could exceed $57 billion annually by 2030 just from states where such sales are permitted, Quartz reported. When states that are poised to legalize it are factored in, the national forecast exceeds $72 billion in sales.
Cannabis companies have begun criticizing Mastercard’s decision, some raising concerns about safety.
Morgan Paxhia, a co-founder of Poseidon Investment Management, which oversees AdvisorShares Poseidon Dynamic Cannabis, said in an interview on Friday that small stores might not have the financial resources to fight against crime. Once taxes are paid, he said, “there’s really not a lot of cash left for, you know, for just operating expenses like security. And so, that’s where I see a disproportionate impact on the smaller businesses in this industry.”
Mr. Paxhia said Mastercard’s decision was a “painful” example of the federal government being unwilling to recognize cannabis as an industry. “We’ve also seen this over the years where a payment solution starts to take shape in our industry and then they get shut down,” he said. “It’s really because we have not seen federal laws changed that gives the banking industry confidence to bank.” He expects Visa to follow in Mastercard’s footsteps soon.
Darren Weiss, the president of Verano, a multistate marijuana operator, said on social media that it “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.”
Paul Armentano, the deputy director of NORML, an organization that works to change public opinion in favor of legalization, said in a statement on Friday that no industry can operate safely, transparently or effectively without access to banks.
“Ultimately, Congress must amend federal policy,” he said, “so that these growing numbers of state-compliant businesses and those millions of Americans who patronize them, are no longer subject to policies that undermine their ability to conduct transactions safely and effectively.”
Going cashless has not been easy. In 2017, Hawaii became the first state in the nation to have a cashless dispensary system with the use of the payment app CanPay. The app can be used for cannabis transactions in a handful of other states, including California and Colorado, The Associated Press reported.
More recently, Congress has been evaluating the proposed Secure and Fair Enforcement Banking Act, or SAFE Act, which would legalize marijuana banking by stipulating that the proceeds of a state-sanctioned marijuana business would not be considered illegal under federal laws against money laundering.
The Senate Committee on Banking, Housing and Urban Affairs held its first hearing on the measure in May. In his opening remarks, Senator Tim Scott, Republican of South Carolina, noted that the Justice Department was concerned that the bill “could create loopholes in our money-laundering laws, making it harder to catch criminals that traffic weapons, fentanyl and even people.”
But the senator, a former small business owner, said he also understood the importance of having a relationship with a financial institution. “A banking relationship is crucial to providing safety and stability for a company,” he said, “both employees and the customers it serves.”