Mastercard’s Cease-and-Desist Letters Halt Cannabis Debit Card Transactions

Mastercard has told payment processors and banks to stop allowing marijuana transactions on its debit cards.

Following cease-and-desist letters sent by Mastercard last week, companies that facilitated PIN debit payments for cannabis have been attempting to provide alternatives to the dispensaries that were using them, Bloomberg reported Wednesday (July 26).

A spokesperson for Mastercard told Bloomberg: “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.”

Reached by PYMNTS, a Mastercard spokesperson confirmed the comments in the report attributed to Mastercard.

News of the Mastercard shutdowns has created a challenge for the cannabis industry that is already struggling with payments due to the drug’s federally illegal status, despite its being legal in 38 states, according to the report.

As other payment options have been taken away, cannabis companies have had to return to using cash or automated clearing house (ACH) payments, the report said. They are seeking alternatives because the use of cash exposes them to the risk of theft and the use of 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 organization do not do so because of cannabis’ status of being illegal at the federal level, per the report.

“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.”

It was reported in January that U.S. Sen. Cory Booker, D-N.J., believes broad marijuana legislation has good prospects in Congress. In the past, Booker has pushed for a bill that would legalize cannabis and allow companies in the industry to work with U.S. banks, Seeking Alpha reported at the time.

In the meantime, FinTechs and others have been gearing up for growth in the cannabis industry in the states in which marijuana has been legalized. Cannabis stocks typically rise when legal reforms are proposed.