While CBD is becoming a mainstream product, and major retailers like CVS and The Vitamin Shoppe are stocking their shelves with it, the CBD industry is still uncharted. Hemp and its benefits are not a new concept, however the unexpected growth and popularity of CBD has surprised many merchants.
For this reason, many merchant processors are taking a step back from processing CBD transactions, including the most popular U.S. merchant processor. Most CBD companies are losing access to their merchant processors that allow them to complete online transactions.
Wait – I Thought Hemp & CBD Was Legal?
The 2018 Farm Bill did legalize the farming of industrial hemp in the United States. CBD was removed as a Schedule I substance and reclassified as an “agricultural commodity.” The 2018 Farm Bill allowed hemp to be grown and sold across state lines. After its passage in December of 2018, many companies and consumers began focusing heavily on CBD – researching more about its benefits, learning more about the science behind it and stocking their shelves with it. In addition, this bill also gave banks, payment processors and credit card companies the ability to allow hemp transactions, which has transformed the industry.
So why are merchant processors backing out now? This is because some merchants were not looked at closely enough before they were allowed to process payments. These merchants were not reputable and allowed too many chargebacks to go through, which was detrimental to the bank. Some of these merchants were also found to be selling product that were over the Federal government’s legal limit of 0.3% THC, which the payment processors wanted no part of.
While there are many differences between CBD and marijuana, as marijuana is legalized in more states, more banks will become accessible to those business, and CBD businesses as well. The Secure and Fair Enforcement (SAFE) Banking Act passed the U.S. House Committee on Financial Services in March, which allows banks to work with marijuana companies. If passed in the House, this could be a game changer for the industry.
On May 8th, the attorney generals of 38 states and territories sent a letter to Congress encouraging them to work with marijuana companies, and 17 states’ treasurers have also given their support of the pending cannabis financial services bill. Many Americans, and their representatives, are pushing to have CBD accessible to everyone, and we are hopeful that things will change and become much easier very soon.