While you’d think that various American industries would rejoice and open their doors to lucrative partnerships with CBD companies, it seems that a cloud of uncertainty has cast its shadow, causing industries and government agencies alike to remain cautious and still.
On March 14, 2019, the largest domestic CBD payment processor, Elavon Inc., a subsidiary of U.S. Bancorp, wrote in an email to its hemp and CBD clients: “After several months supporting this merchant segment, it has become clear that the pace of an evolving federal and state regulatory framework makes it extremely difficult to validate the qualifications required to operate within this industry,”
4. Payment Terminals
“Prior to the notification of the merchant services cancellation, we were not fully aware of the limitations of the banking industry to support the needs of the CBD industry,” said Brian Baum, the CEO of Cannovia.
According to Baum, “What became clear was that the options were limited and any banks willing to consider supporting the industry were beginning to utilize the services of intermediaries such as FINCANN to assist them in managing the sheer volume of entities looking for merchant services solutions.”
The CBD industry has been moving full steam ahead in 2019, bolstered by the 2018 Farm Bill and advancements on the federal level to ensure cannabis banking services, but that progress hasn’t been enough for some financial services institutions to continue working with the industry.
Elavon isn’t the only merchant services provider rethinking its hemp and CBD clients. On March 19, Cannovia, a maker of CBD-infused products, was notified by Stripe that its account would be terminated. Having just launched its online storefront on March 14, Cannovia attempted to appeal Stripe’s decision but was denied.
With both Stripe and Elavon out of the picture, Cannovia soon learned that finding a merchant services provider on its own wouldn’t be easy.
On March 14, 2019, Elavon, a payment processing subsidiary of U.S. Bank, notified its hemp and CBD clients that it had recategorized hemp and cannabidiol-based merchants as a prohibited business type and that accounts for such merchants would be closed within 45 days.
Meanwhile, both financial institutions and industry stakeholders continue to keep an eye on the SAFE Banking Act, which would provide certain protections for depository institutions that work with cannabis-related businesses as well as the businesses themselves. The House Committee on Financial Services is currently drafting a report on the act to present to the House of Representatives. If the full House approves the bill, the Senate will vote on it.