Mastercard Tells Banks to Block Marijuana Purchases
In a significant setback for the struggling cannabis industry, Mastercard has directed banks to block marijuana-related transactions on its debit cards, as reported by Bloomberg.
Despite being legalized to varying extents in 38 states, marijuana remains illegal under federal law, leading most major banks to avoid any involvement with the cannabis sector.
A spokesperson from Mastercard responded to the matter, stating, "As soon as we became aware of this issue, we conducted a swift investigation. As per our policies, we instructed the financial institutions providing payment services to cannabis merchants, connected to Mastercard, to discontinue such activities."
The spokesperson further clarified, "Since the federal government still considers cannabis sales illegal, these purchases are not allowed on our systems."
Entities that facilitated PIN debit payments for marijuana transactions received cease-and-desist letters from Mastercard recently, leaving them struggling to find alternative solutions for dispensaries, according to a source familiar with the situation, as mentioned in the Bloomberg report.
Visa has also taken steps to curtail cannabis purchases made through its networks. In 2021, the company reportedly sent a memo to banks, stating that cashless ATMs, which were used by marijuana businesses as a workaround, violated its rules. Cashless ATMs allowed customers to use a bank card while the transactions were recorded as ATM withdrawals.
Industry experts view Mastercard's action as a major blow to a sector already operating on the periphery of the financial system. Josh Glasstetter, spokesperson for the US Cannabis Council, expressed concern over the impact, noting that the estimated $30 billion revenue expected from the industry this year would largely be generated through cash transactions. This could make workers vulnerable to robberies.
Glasstetter stressed the urgency for Congressional action to address the issue. The lack of banking and financial services available to state-legal cannabis businesses has been a long-standing problem, prompting calls for legislative measures.
Last year, Sen. Patty Murray, D-Wash., voiced her concerns about the lack of banking options for the cannabis industry, particularly in light of a series of dispensary robberies in her home state. She highlighted the risks faced by employees working with large amounts of cash.
The Senate Banking Committee held its first hearing on the Secure and Fair Enforcement (SAFE) Banking Act in May, aiming to facilitate easier access to banking services for the cannabis industry. The bill seeks to protect banks and their employees from penalties for serving cannabis businesses in states where marijuana use is legal.
However, some, like Sen. John Cornyn, R-Texas, expressed skepticism about the possibility of passing a banking bill specifically for the marijuana industry, referring to it as "wishful thinking" earlier this month.
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