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Friday, July 19, 2024

Mastercard moves to ban cannabis purchases on its debit cards

While recreational marijuana is legal in many states, the continued ban on cannabis at the federal level means that weed sales still exist on the fringes of the economy.

People who use their Mastercards to buy weed might soon be out of luck. The credit card company has reportedly issued cease-and-desist letters to payment processors last week.

While recreational marijuana is legal in many states, the continued ban on cannabis at the federal level means that weed sales still exist on the fringes of the economy.

Read more: Twitter legalizes cannabis ads

Many banks will not work with legal mairjuana distributors, and now Mastercard is attempting to sever any links to the industry, according to Reuters.

The company issued a statement on Wednesday, making it clear that they did not approve of their products being involved in marijuana purchases.

“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 connects them to Mastercard to terminate the activity,” the company said, according to Reuters.

“The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems.”

Mastercard is not alone in shutting down mairjuana purchases that involve using their cards. Visa issued a similar edict to block transactions at dispensaries and other legal weed distributors, according to Bloomberg.

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Since their inception, marijuana distributors have struggled to find ways to accept non-cash payments from customers. One common practice was using cashless ATMs, which served as a loophole that made it seem like the financial transactions occurring at dispensaries were merely account withdrawals, rather than product purchases, according to Bloomberg.

After regulators cracked down on the cashless ATM loophole, it became more common for people to purchase legal weed, using their debit cards and PINs, Bloomberg reported.

Tyler Beuerlein, an executive at Safe Harbor Financial Services, which does banking for the legal weed industry, warned that cannabis sellers could be running out of sales options.

“More people have migrated to PIN debit in the last year and a half as the cashless ATMs have had issues,” he told Bloomberg. “If the PIN debit solutions go away, it leaves people back with ACH or cash.”