Mastercard Pulls the Plug on PIN-Debit for Cannabis Transactions, Now What?

Jul 28, 2023 Chicago, IL

In a surprising development, Mastercard has told payment processors and banks to stop allowing marijuana transactions on its debit cards. Mastercard claims the move comes after it only recently found out that certain financial institutions were working with dispensaries to accept debit payments despite the federal ban. “As we were made aware of this matter, we quickly investigated it. In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connect them to Mastercard to terminate the activity,” Mastercard said in a statement on Wednesday. “Our rules require our customers to conduct lawful activity where they are licensed to use our brands,” Mastercard told Bloomberg. “The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems.”

We are skeptical that Mastercard only recently became aware of this issue, but putting that aside, the shutdown comes as a shock to the cannabis industry’s system. How to conveniently accept customer payments is an issue that has plagued the cannabis industry since its inception with federal illegality forcing dispensaries to operate mainly as cash businesses until very recently. There have been several creative solutions that have been tried and implemented in the past few years, and PIN-debit was certainly one of them. Mastercard’s decision thus creates a significant challenge for the industry and is a step in the wrong direction. As other payment options have been taken away, cannabis dispensaries have had to return to using cash or automated clearing house (ACH) payments. They are seeking alternatives because cash exposes them to theft and ACH is complicated for their customers, as it requires them to provide a bank routing number and account number. Some smaller, regional banks have provided solutions, but national organizations do not do so because cannabis remains illegal at the federal level.

Greenspoon Marder assists clients with payment processing solutions and is monitoring this development closely. If your business has been impacted by Mastercard’s announcement, reach out to let us know. You can contact the author of this article, David Standa at [email protected].

About Greenspoon Marder

Greenspoon Marder LLP is a full-service law firm with over 240 attorneys and more than 20 office locations across the United States. With operations from Miami to New York and from Denver to Los Angeles, our firm attracts some of the nation’s top talent in key markets and innovation hubs. Our core practice areas include Real Estate, Litigation, and Transactional Services, complemented by the capabilities of a full-service firm. Greenspoon Marder has upheld a spot on The American Lawyer’s Am Law 200 as one of the top law firms in the U.S. since 2015, and our goal is to provide exceptional client service by developing a thorough understanding of each client’s business needs and objectives in order to provide strategic, cost-effective solutions.

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Mastercard Pulls the Plug on PIN-Debit for Cannabis Transactions, Now What?

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