Editorial Policy

Why you can’t easily buy pot with your credit card

Tom O'Connell

April 20, 2016

We can buy coffee and furniture with our plastic, and a Chinese tycoon bought a painting for $170 million with his American Express card in 2015, so why can’t we just as easily buy marijuana where it’s legal with our credit or debit cards?

It sure would make things easier in those 23 states that permit medical marijuana and the four states and the District of Columbia that allow recreational use of pot. And card acceptance is not just easier for patients and recreational users, but for the dispensaries and “ganjapreneurs.”

But as long as selling pot remains a crime under federal law, most banks and the big credit card issuers are –- for now -– staying on the sidelines. The question is for how long. Nationwide sales of legal marijuana could reach $5 billion in 2016, estimates Taylor West, deputy director of the National Cannabis Industry Association.

Sure, there are some medical marijuana dispensaries that do take credit cards, but they are few, and they may not be being honest with their merchant services company, marijuana industry experts say.

For now though, it’s often a cash only business.

“It’s not if but when it’s going to happen. Banks know that and are looking at creative ways to get around federal requirements.”
 — Leonard Salgado,
director of Ultra Health’s
New Mexico pot shots

For Leonard Salgado, the director of Ultra Health’s New Mexico pot shops, all business is strictly cash. Even so, his medical marijuana company’s banking account has been shut down eight times. Banks, he says, are afraid to do business with him.

“It’s definitely a challenge, but we also are aware there are banks in other markets trying to work within federal banking guidelines to allow more flexibility to allow us as cannabis producers the ability to do normal banking,” said Salgado.

Employees at dispensaries are paid in cash, and the money handlers haul tens of thousands of dollars across town, often with an armed guard and using other methods to throw off the bad guys from the scent of all that green money.

Where banks fear to do business, so also do credit card companies.

MasterCard didn’t respond to a request for comment, and Visa emailed this statement:

“In offering our payment service, Visa adheres to the rule of law and seeks to prevent our network from being used for unlawful purposes.

“Although the federal government previously announced it will not challenge state laws that legalize and regulate marijuana sales, marijuana nevertheless has remained illegal under federal law. Such transactions are not permitted on the Visa network until such time as federal law allows otherwise.”

West notes that there were guidelines put out two years ago that attempted to lay out a roadmap for banks to service the industry. “But that didn’t actually change any laws, and for the most part, banks have kept their distance,” he says. “We have seen a small trickle of improvement. Obviously, if you don’t have access to a bank account, that makes it difficult to do business.”

One pending piece of federal legislation, the Marijuana Businesses Access to Banking Act of 2015, would protect banking institutions. It has bipartisan support, but has stalled in Congress. A sponsor of the bill, Sen. Jeff Merkley, D-Oregon,  describes the need for such legislation: “Forcing businessmen and businesswomen who are operating legally under Oregon state law to shuttle around gym bags full of cash is an invitation to crime and malfeasance. That must end.”

“The easiest way to fix this is to end federal marijuana prohibition, and we do see momentum in Congress, but thus far it’s been mostly symbolic.”
— Jessica Gelay,
policy coordinator,
Drug Policy Alliance

In the meantime, innovative startups are attempting to fill the gap, and some local credit unions are finding ways to work with dispensaries. New fintech ventures Hypur, Kind Financial and Tokken are poised to do business with the industry. Tokken (pronounced “token”) is sort of the PayPal of medical cannabis banking, a middleman between dispensaries and banks. The service moves money from a dispensary customer to its own bank account, and then Tokken pays the dispensary.

Washington state has the nation’s only state-licensed, federally registered company that transmits funds between banks and dispensaries. PayQwick customers do use plastic — a preloaded, prepaid PayQwick card linked to their bank account — to purchase marijuana at dispensaries. There’s even a pay-by-phone app and a rewards program for using the card.

This patchwork of services provides temporary solutions, but legalization proponents see it as an unnecessary burden that will be resolved only by across-the-board federal legislation.

“The bottom line is that we do need Congress to take action,” says Jessica Gelay, policy coordinator with the Drug Policy Alliance. “The easiest way to fix this is to end federal marijuana prohibition, and we do see momentum in Congress, but thus far it’s been mostly symbolic.

“For instance, there have been votes in both houses this year supporting amendments to appropriations bills that would prevent federal dollars from being spent to prosecute businesses acting in compliance with state marijuana laws. But financial institutions want a guarantee, and they only get that with statutory protection.”

For now, and outside of the temporary solutions, dispensary owners and marijuana customers are stuck conducting all business in cash.

For Ultra Health’s Salgado, who estimates that New Mexico alone could see annual sales of nearly half a billion dollars if recreational cannabis sales were made legal, “It’s not if but when it’s going to happen. Banks know that and are looking at creative ways to get around federal requirements.”

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