Cannabis companies in Colorado don’t have traditional bank accounts and can’t accept credit cards from customers. The also can’t use credit cards to pay their bills.

That’s because marijuana, while legal for recreational and medicinal use in Colorado and a growing number of other states, is still illegal under federal law.

As a result, licensed cannabis growers and retailers turn to a host of software and payments companies that have sprung up to allow cannabis businesses to take payments from customers and pay their vendors.

Littleton, Colorado-based CanPay is one of dozens of niche financial institutions catering to a marijuana industry shunned by big banks and credit card companies. Others include LeafLink in New York City and Paybotic Financial in West Palm Beach, Florida.

Why is it like this?

Cannabis businesses pay a hefty price for the services of such companies, which conduct extensive legal and compliance checks before they work with the marijuana industry.  

The dichotomy between state and federal marijuana laws sets up high hurdles for financial institutions to clear before they can work in the global $33.7 billion legal cannabis industry.

While marijuana is legal for either medical or recreational use, or both, in 38 states, it remains illegal under federal law. Fearing criminal liability, major banks and credit card providers won’t work with companies that sell marijuana, even in states that have legalized it.

“While FinCEN (the Financial Crimes Enforcement Network) has issued guidance that indicates banks can provide services to marijuana businesses, provided they comply with the law and comply with FinCEN guidance, there is just a lot of risk involved from a regulatory compliance perspective,” said Julia Dempewolf, an attorney at the Boston law firm Goodwin Proctor.

A peer at another law firm seconded that notion. “Regulators at the federal and the state levels expect them to have more robust diligence and monitoring programs in place,” said Andrew Bigart, a Washington attorney who works for the law firm Venable and advises financial institutions. 

Most don’t think the extra work is worth it, he said.

The workarounds 

To fill the gaping void left by big banks, small credit unions have opened accounts for marijuana companies, and a cottage industry of payments companies cater to the marijuana industry.

“There are a number of banks and other financial institutions that are providing financial services to marijuana-related businesses, but in my experience they are typically doing it under specific and tightly controlled compliance programs,” Bigart said.

That means these companies need to find a way to move money without relying on traditional banks or credit cards. 

“Some of them will accept Paypal and Square, but with those a lot of them get booted off,” said Kalle Radage, founder of Clearly Payments, a Vancouver-based payments processing company that includes marijuana sellers in the United States and Canada among its clients. “They do it for a couple of months then get kicked out.”

A representative of Paypal did not respond to messages seeking comment. In an email, a Square spokesperson said that accepting payment for marijuana violates the company’s terms of service.

Payments companies that work with the marijuana industry use a number of strategies, including cashless ATMs, or putting money on a gift card that can be used like a debit card.

“Pretty much everything in the cannabis industry is a workaround,” added Aaron Ranka, chief revenue officer for Dama Financial Solutions, a California-based company that provides banking and payments services to marijuana sellers.

It also means the payments companies that service the cannabis industry need to spend more time on legal issues.

“They have to complete significant due diligence and compliance checks,” said Aaron Smith, CEO of the National Cannabis Industry Association.


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