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Mastercard Directives Block Cannabis Purchases on Debit Cards

Lemetria Whitehurst

by Lemetria Whitehurst

August 14, 2023 08:00 am ET Estimated Read Time: 5 Minutes
Mastercard Directives Block Cannabis Purchases on Debit Cards

In a recent controversial move, Mastercard issued a directive to United States banks, ordering them to block cannabis purchases on its debit cards. The decision has ignited a firestorm of debate, primarily due to the unique nature of debit cards. 

For years, most major credit cards have prohibited cannabis purchases with minimal public outcry. This new mandate struck a chord because, unlike credit cards, debit cards are linked directly to an individual’s bank account. Consequently, many individuals are angry over the prohibition of a lawful product (akin to alcohol) that involves spending their own money.

The directive from Mastercard underscores the contradictory landscape of cannabis laws in the United States, where cannabis is legal for medicinal and recreational use in most states yet remains illegal under federal law. This tension between federal and state regulations and the recent Mastercard directive has further complicated the already labyrinthine state of affairs for the burgeoning cannabis industry.

The Current State of Marijuana Legislation

Navigating the complex landscape of cannabis legislation in the United States requires understanding federal and state-level laws. According to the Controlled Substances Act, marijuana remains a Schedule I drug, which makes it illegal at the federal level.

This classification places cannabis in the same bracket as heroin and LSD, deemed to have the highest abuse potential and no currently accepted medical use. However, this rigid federal stance contrasts starkly with state-level policies. In 38 states, cannabis has been legalized to varying degrees for medicinal and recreational use. 

Impact of Mastercard’s Decision on the Cannabis Industry

Mastercard’s recent decision sent shockwaves throughout the cannabis industry. This directive, coupled with Visa’s similar crackdown on cannabis transactions via cashless ATMS in 2021, presents a significant hurdle for both consumers and cannabis dispensaries. With the prohibition of debit card purchases, dispensaries are now forced to operate predominantly on a cash-only basis.

Simply put, for some, this could potentially be dangerous. While this might seem like a simple logistical issue, the implications are far-reaching and complicated. It places an increased operational burden on dispensaries, with added complexities of handling, storing, and transporting large amounts of cash, undoubtedly increasing security risks for staff and customers. 

Lastly, the absence of card transactions severely restricts the financial data available to these businesses for analysis and strategic planning. The credit card companies stance, driven by federal regulations, is not just a minor inconvenience but poses serious operational challenges to the cannabis industry.

Cannabis Industry Representatives React to Mastercard Directives

Responses from cannabis industry leaders to Mastercard’s directive have been resoundingly critical. Brady Cobb, CEO of Sunburn Cannabis, voiced his disappointment, declaring the move another blow to the state-legal cannabis industry and a setback for consumers who wish to access this growing sector. 

Echoing Cobb’s sentiment, Josh Glasstetter, spokesperson for the US Cannabis Council, highlighted the harsh reality that the industry’s estimated $30 billion in revenue this year will be ‘overwhelmingly’ generated through cash transactions. Glasstetter explained, “State-legal cannabis businesses are locked out of most banking and financial services. The announcement by Mastercard is a powerful reminder of the need for action by Congress.” 

Washington state Senator Patty Murray also lent her thoughts, expressing valid fears of a potential surge in robberies, given the larger amounts of cash that dispensaries and their employees will handle. According to Murray:

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“It makes absolutely no sense that legal businesses are being forced to operate entirely in cash, and it’s dangerous – and sometimes even fatal – for employees behind the register.”

The industry representatives’ comments underline the broad spectrum of issues presented by the Mastercard directive, from hindering business growth to jeopardizing employee safety.

Public Sentiment: Criticisms and Opinions From The People

Reactions to Mastercard’s recent decision among the people have been markedly vocal — highlighting significant public concern. One online commenter highlighted the stark reality of what cash-only transactions mean for security within the industry, recalling the tense atmosphere of early dispensaries in Colorado:

“I remember the early days in CO when it was cash only. You walked past guys with rifles and pistols to get in the dispensary. There was a LOT of cash in those early shops.”

This vivid memory underscores the real dangers inherent in the directive, which potentially returns dispensaries to an era of high-security risks and volatility.

Meanwhile, some have questioned the legality of Mastercard’s decision itself. One reader pointed to the 2018 Farm Bill, which allows the sale, transport, and possession of hemp-derived products containing less than 0.3% THC by dry weight. They argued:

“I was under the impression that anything containing under 0.3% THC dry weight is legal for sale, based on the 2018 farm bill. There is supposed to be no restrictions on the sale, transport, or possession of hemp-derived products, so long as those items are produced in a manner consistent with the law. Seems that this could be challenged and beat”.

This quote not only questions the coherence of Mastercard’s directive with existing laws but also highlights a potential avenue for challenging the decision.

These firsthand accounts vividly portray the broader societal and policy implications of Mastercard’s directive, touching on issues from public safety to the contradictions within the current legal landscape of the cannabis industry.

The Bottom Line

Mastercard’s mandate to block cannabis purchases on its debit cards illustrates the conflict between federal law and state-level legalization, particularly in a space where cashless debit transactions represent an individual’s own bank funds. This directive, coupled with similar moves by Visa, and concerns raised by industry representatives and the public, emphasizes the critical need for a resolution to the cannabis industry’s financial dilemmas. This is a conflict we will continue to watch. 

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