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Mastercard to End Debit Card Use for Cannabis Purchases

S.J. Steinhardt
Published Date:
Aug 1, 2023


Mastercard is ending the use of its debit cards to purchase cannabis, The New York Times reported.

The company said that purchases were not allowed on its systems because federal law prohibits the sale, possession and use of cannabis in all its forms. This applies to customers who use bank cards and personal identification numbers (PINs) to access their own cash to buy cannabis in states where the drug is legal for recreational or medical reasons.

“As we were made aware of this matter, we quickly investigated it,” a spokesman for Mastercard said in a statement reported by the Times. “In accordance with our policies, we instructed the financial institutions that offer payments services to cannabis merchants and connects them to Mastercard to terminate the activity.”

Medical cannabis is legal in 38 states, three territories and the District of Columbia. Recreational use of the drug is legal in 23 states, two territories and the District of Columbia.

Due to federal law, most big banks and credit card providers will not work with cannabis businesses, causing these businesses to operate by cash only. Cannabis industry experts interviewed by the Times criticized Mastercard’s decision, expressing concerns about safety due to the large amounts of cash they keep on site.

One, Morgan Paxhia, a co-founder of Poseidon Investment Management, which oversees AdvisorShares Poseidon Dynamic Cannabis, called Mastercard’s decision a “painful” example of the federal government's refusal to recognize cannabis as an industry. “We’ve also seen this over the years where a payment solution starts to take shape in our industry and then they get shut down,” he told the Times. “It’s really because we have not seen federal laws changed that gives the banking industry confidence to bank.” He expects Visa to follow Mastercard’s lead soon.

“Ultimately, Congress must amend federal policy, so that these growing numbers of state-compliant businesses and those millions of Americans who patronize them, are no longer subject to policies that undermine their ability to conduct transactions safely and effectively,” Paul Armentano, the deputy director of the National Organization for the Reform of Marijuana Laws (NORML), said in a statement reported by the Times.

To that end, the Senate has, once again, taken up consideration of the Secure and Fair Enforcement Banking (SAFE) Act, which would protect federally chartered financial institutions from incurring penalties for servicing legitimate cannabis businesses. The Senate Committee on Banking, Housing and Urban Affairs held its first hearing on the measure in May. Previously, in 2021, the legislation passed the House of Representatives for the fifth time since 2013 but did not pass the Senate.

(For more on this issue, see “With NYS dispensaries to open soon, CPAs see opportunities and hurdles” on page 1 of the November/December 2022 issue of The Trusted Professional).

To learn about important developments in the adult-use cannabis industry, attend the Cannabis Conference Webcast tomorrow, Wednesday, Aug. 2.

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