No More Weed Schemes: Pot Retailers Can No Longer Use Cashless ATMs, What Now & Why SAFE Might Not Be The Answer

For years, some if not most cannabis retailers have been obliged to employ a workaround to function within the restrictive system. Now, that is no longer an option. 

Marijuana merchants have been relying on cashless ATMs to bypass limitations on the types of sales payment cards they can legally accept. These “point of banking” systems enabled buyers to use a bank card instead of cash. This technology made cannabis purchases look like ATM withdrawals coming from various addresses. 

Why they had to do this? 

It all boils down to the biggest problem of the cannabis industry – banking. Cause of the issue – Schedule 1 status of the plant, which makes it federally illegal. Being illegal under federal law, financial institutions don’t want anything to do with it, which means cannabis businesses don’t have access to standard banking and financial services. 

Cashless ATMs Shut Downs Were Expected 

Now, weed companies can no longer rely on this workaround, because some of the biggest processors of ATM transactions, such as NCR’s NCR Columbus Data Services, have cut off their services according to three people familiar with the matter, reported Bloomberg Law. 

These transactions seem to have moved around $7 billion past the standard money-laundering controls of the banking system this year, or around a quarter of all U.S. marijuana sales. 

The move comes almost a year after one of the largest payment processors in the world, Visa Inc. V, issued a compliance memo to customers warning them that incorrectly coding point-of-sale transactions via cashless ATMs could be penalized or punished by unspecified enforcement procedures. Does this mean that pot shops should have expected this to happen? 

To find this out, and more on the issue, Benzinga reached out to Sahar Ayinehsazian, a partner at Vicente Sederberg LLP and co-chair of the Banking and Financial Services Access Group at the firm. Vicente Sederberg is a national cannabis law firm providing legal and policy services to marijuana, hemp and psychedelics businesses, ancillary companies, investors and governmental bodies. 

“The recent shutdown of cashless ATM processing capabilities for cannabis operators was expected,” Ayinehsazian told Benzinga. “It should come as no surprise, given the credit card networks’ long-standing stance on cannabis, reiterated by Visa’s 2021 memo on the subject. Cannabis businesses using cashless ATMs should have moved away from this payment method at the end of last year/ beginning of this one and planned for a shutdown like this. This shutdown further underscores the ongoing need for banking and financial reform for cannabis businesses and the passage of the SAFE Act.”

Small pot shops in Arizona, California and Massachusetts have all had disruptions, according to workers who were advising customers to use cash. What’s more, big dispensary chains of multi-state operators were also said to be affected. For example, Curaleaf Holdings CURLF said last April that it processes almost a third of its transactions via cashless ATMs, but is now telling customers at some stores that it is unable to accept bank cards, reported Bloomberg Law.

What Can Pot Companies Do Now? 

“Closed loop transactions may be a path forward for the time being,” Ayinehsazian said. “Any business looking to use cash-alternative payment methods should very thoroughly examine the processor and every step funds will go through from the moment of sale until the moment it hits their account to ensure that the method they may be using is not prohibited.”

Curaleaf, for example, also offers another solution – payments based on the automated clearing house technology, or ACH, that transfers funds directly from bank accounts. The benefit? Not using the credit card system. The drawback? Consumers need to share their bank and routing info to sign up.

Some of the companies that offer different payment solutions to weed businesses include CanPay, Hypur, Aeropay, Dutchie and KindPay. 

For example, a Chicago-based fintech Aeropay offers a different ACH-based solution.

"Our API-first solution enables us to embed payments into other platforms such as POS and eComm to provide an omnichannel experience for retailers and consumers alike. This optimization is important to create a seamless checkout flow that meets the expectations of the modern buyer when purchasing cannabis both in-store and online," founder Daniel Muller explained the company’s system.

What About Marijuana Banking Bill? Is This The Answer? 

The news about payment transaction challenges comes at a time when the industry is hanging onto hopes of seeing the marijuana banking bill, SAFE Act, passed in the lame-duck session. Last week, lawmakers opted not to put cannabis reform in the National Defense Authorization Act (NDAA) defense bill, which many were hoping would secure passage of the legislation. 

The bill still has a chance of advancing as part of a different omnibus appropriations bill, or perhaps as a standalone in a lame-duck session. In fact, many industry experts have been hopeful, including financial analyst Pablo Zuanic of Cantor Fitzgerald, as well as politicians like Democratic Representative Ed Perlmutter of Colorado, who recently shared his optimism on the issue. 

The question is: will the SAFE Banking Act resolve all the financial struggles the marijuana industry is dealing with or just some? In other words, is it comprehensive enough?

A report 'Dangerous Delays,' written by David Borden of, claims that SAFE only provides depository services and not the acceptance of electronic payments via debit or credit card, writes Seeking Alpha. "There are knowledgeable participants in the cannabis and financial industries who believe SAFE will be enough to bring credit card networks in," the report states. "Of the people we spoke with, those in banking, or are close to industry processing and administration, were the least optimistic."

‘More Than Just A Matter Of Banking’

Ayinehsazian confirmed that although “SAFE would be a massive movement for the cannabis industry as a whole and the banking front specifically, there is no mandate in SAFE that financial institutions accept cannabis operators or that payment processors allow for cannabis-related transactions on their networks.”

“Given the growing bi-partisan support for SAFE, I am optimistic that its passage may positively impact payment processing, but there can be no guarantees,” she added.

Like many industry experts, Ayinehsazian is optimistic about seeing SAFE form part of the omnibus bill, highlighting the importance of this piece of legislation. “This is more than just a matter of banking – at its core, SAFE seeks to increase public safety by removing the burdens and dangers that come with cash-only operations from the cannabis industry.”

She concluded by highlighting the important role of marijuana businesses in providing secure, safe and heavily monitored access to cannabis for consumers and patients, at the same time making sure that minors can’t access it.

“These businesses give back to their communities in a myriad of ways, including local hiring, funding of local projects, and providing educational programs. The industry has spent the last decade proving that the harmful stereotypes of cannabis operators and consumers are simply incorrect," Ayinehsazian said. "It is my sincere hope that the SAFE Act can finally pass and, in its passage, provide access to the financial services of which the cannabis industry has been unfairly deprived.”

Photo: Benzinga Edit; Sources: CYAM and jpm.foto on Shutterstock

Posted In: CannabisNewsExclusivesMarketsInterviewAerropayBloomberg Lawcannabis financial servicesCanPayCashless ATMsDangerous DelaysDavid BordenDutchieEd PerlmutterHypurKindPayMarijuana Banking BillPablo ZuanicSAFE ActStopthedrugwar.orgVicente Sederberg LLP Sahar Ayinehsazian
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