Marijuana Laws May Be Enforced
Colorado and Washington have been flourishing with exceeding tax revenue in the last few years because of the major growth of the marijuana industry of each state. But is all this growth going to potentially come to a sudden and abrupt halt? In a memo recently released by Jeff Sessions, the Attorney General of the US, he explains to the US Attorneys that marijuana is a dangerous drug and should be dealt with as a serious crime. Sessions’ memo was specifically aimed at rescinding the Cole memo, which allowed states who made producing, selling and purchasing marijuana legal, not have to worry about the federal government intervening. Based on his statement he is clearly doubling down on his longstanding view of the substance and the interpretation of federal law. What this could mean for the progress of high risk credit card processing in the specific industry and the individual businesses has yet to be seen. Needless to say, quite a bit is hanging in the balance.
In the early days, distributors had very little, to no options in terms of mmj merchant accounts or other avenues in which they would be able to process their sales. The major banks refused to touch them because of the possible legal recourse by the government. In true capitalist fashion, when there is a need in an industry, businesses spring up to fulfill that need. Enter small banks and credit unions to pick up the slack left by the bigger banks and credit processing companies. Although there is a higher amount of scrutiny and the potential for legal issues, due to the nature of the industry, these companies still persist.
Till there is some sort of agreement between states and the federal government on how the country is to proceed with the distribution and legalization of marijuana, the future for credit cards being used in the purchasing process is still very obscure. The major credit card companies have listed marijuana dispensaries as illegal businesses and will not process transactions for them. But, with the potential for huge earnings in a growing industry, there will always be entrepreneurs looking for avenues in which to capitalize on these earnings and assist where assistance is needed. In comes Point of Banking Systems. POB systems process in terms of a digital cash withdrawal. The transaction is rendered, the system draws from cash cards in the same way an ATM would and the difference from the transaction is returned to the customer as change. This lack of physical cash increases the safety of the dispensaries, by ensuring there are not large amounts of cash in one, potentially vulnerable, location. Plus, adding to the ease of the purchase for the customers who may not be carrying cash with them. Another issue that presents itself when processing marijuana transactions is the legitimacy of the entity claiming to be a distributor. There is little doubt that by legitimate dispensaries being able to use merchant services, that it will increase the security of the industry and weed out the potential law breakers that tend to use cash only businesses to their benefit. In the end, having the digital paper trail would only assist in keeping the accountability of the industry at the highest levels possible.
With the growing approval for the legalization of marijuana, by both government representatives and the people, there is no doubt, that in time the credit card companies will move into the industry. If not by the legalization, then by the market itself through subsidiaries. After all, they are in the business of making money on transactions. Something that the marijuana industry is in so shortage of, since it is one of the fastest growing industries in the country.
This fine line that financial organizations are choosing to take in order to service a rapidly growing industry is exactly what the capitalist system is designed to do. Where a need exists, a business is created or repositioned in a way to fill the gap. With new states hopping on board the “legalize it” bandwagon each year, it seems only a matter of time before the legalization of marijuana becomes a reality. Where merchant account services go next will be up to the regulations that could potentially follows and the risk that each provider is willing to take. Definitely an industry that the high risk merchant services industry should be keeping an eye on the horizon for.
Author: Chris Fernandez
Small business authority and entrepreneurial journalist.
Contributing writer at HRMA-LLC
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