Credit Card Processors Discriminate Against Medical Marijuana
The medical marijuana industry is under siege. Legal in 17 States and the District of Columbia, the marijuana dispensaries are not recognized as legal operations under federal law. Aside from the constant threat of raids and civil asset forfeiture, medical marijuana dispensaries also have to contend with payment blockades and outright refusal of banking services.
This state law-federal law dichotomy has led the major payment associations and large credit card processors to shun the entire merchant category. American Express and Discover announced separately that they would follow federal law on the matter. Decisions regarding VISA and Mastercard transactions are mostly in the hands of the large acquiring processors which tend to interpret the law from the federal perspective rather than the state perspective.
Electronic Merchant Systems (EMS) informed its customers in June via email:
“In light of recent developments, we wanted to reach out and make you all aware of the latest news regarding Medical Marijuana merchants. Effective July 1st, 2012, MMJ merchants will no longer be able to accept Visa or MasterCard credit or debit cards.”
However, the diversity in the payments arena with independent sales organizations has allowed some creative workarounds to be designed. According to Jeffrey Green of PaymentsSource, Atlas Payment Processing in San Jose, California and Maxx Payment Processing in Denver, Colorado both offer a way to use payment cards for in-person transactions via a PIN-based countertop terminal. The transaction is processed first as a cash advance or debit card cash withdrawal so technically it is not a transaction for cannabis.
Similar to the financial blockade against Wikileaks, but admittedly on a smaller scale, banks have refused to offer regular banking and payroll services to medical marijuana dispensaries. Huffington Post reports that Christie Lunsford’s medical marijuana business in Colorado was denied business checking services at Wells Fargo Bank, whose comment was that because of “the complex, inconsistent legal environment relating to medical marijuana dispensaries, Wells Fargo has opted not to bank these businesses.”
Overall, the industry has been driven into a cash-only posture making the casual medical marijuana customer a cash-carrying target for criminals unless they go with a door-to-door delivery service like iambud.
Even the seemingly transaction-neutral bitcoin processor, U.S.-based BitPay, has refused to enter the fray. As a processor, BitPay offers same-day conversion of merchant bitcoin into a US dollar bank account. CEO Tony Gallippi explained in an interview that although several have applied, “medical marijuana is not allowed in our terms of service.” Of course to be consistent, other merchant types not allowed by BitPay include ecstasy, MDMA, any controlled substances, weapons, gambling, and sports betting. They will however support transactions for file sharing, storage/backup services, and VPN services, because “freedom of information is important.”
Fortunately, for individuals and merchants around the globe, a third-party processor is not required in order to accept bitcoin.