Cannabis Payment Processing: Which Payment Solutions Are Legal?

The US cannabis industry keeps growing steadily as more states enter the legalization sphere, realizing the tremendous economic impact of legal cannabis and various hemp-derived products.

According to a forecast by New Frontier Data, the US legal cannabis market will reach $30 billion by 2025, growing at a CAGR of 14%. The data analytics company estimates that medical cannabis will make up a significant portion of the sales, growing at a 17% CAGR through 2025 and hitting $13.1 billion. Today, there are many ways to order cannabis online.

According to KOLAS, a Sacramento cannabis dispensary and delivery service, despite new opportunities for cannabis dispensaries to set up shop and conduct legal business, there are various challenges. While KOLAS accepts credit card payments, many dispensaries struggle to do so, as there are numerous roadblocks when it comes to accepting payment.

There’s good old cash, of course, but it comes with security risks and logistical challenges. Many consumers don’t find it particularly convenient either. That’s why other payment solutions should be available as well.

Here are all the legal payment processing solutions that you can implement in your cannabis dispensary business.

Cashless ATMs

Cashless ATMs, or Point of Banking (POB) terminals, enable cannabis dispensaries to accept debit card payments. With a cashless ATM at your dispensary, your customers can deposit money directly into your business account. They need to insert a debit card and enter the PIN, like at any traditional ATM.

The only caveat is that they can pay in $5 increments. For instance, if they need to pay $17, they must deposit $20, plus the transaction fee, and you need to give them $3 in change.

However, since banks see those payments as regular ATM withdrawals, not to mention they can include credit cards, they may not be entirely legal.

That’s why it’s crucial to follow strict guidelines and stay compliant with all the federal and state laws and regulations, the most important being keeping credit cards out of the equation.

Numerous payment solutions companies like Paybotic offer compliant MMJ card processing solutions customized to meet the needs of every high-risk business. Apart from streamlining debit card transitions, they offer chargeback prevention and fraud protection, so implementing them can help you mitigate risks.

ACH Transfers

ACH (Automatic Clearing House) transfers are bank transfers that don’t include credit or debit cards, wire transfers, or checks. They involve transferring funds electronically from one bank account to another. As such, they’re entirely legal.

ACH transfers are an excellent alternative to cashless ATMs, even though processing takes 1-2 business days.

If you want to implement this payment solution, you must enlist a third-party provider to help you set up the system. Your customers will need to register through the system, download and install its mobile app to check into your dispensary.

Make sure you integrate your POS system to enable seamless PIN-based transactions.

Electronic Checks

Electronic checks, or eChecks, function like paper checks and use ACH to transfer funds from a customer’s checking account into a merchant’s business bank account.

Not many consumers use electronic checks, but you should still make them an option.

People who rely on them regularly are cannabis producers and other suppliers of hemp-based products. So, implementing eChecks into your payment processing system can help you streamline B2B transactions.


Accepting crypto as payment is another legal way to enable customers to pay for their purchases at your cannabis dispensary. All they need is a digital wallet funded with crypto.

Big data and AI are revolutionizing payments through digital wallets, both for fiat money and cryptocurrencies. Apart from enabling seamless payment processing, they provide insightful data analytics for improving efficiency, productivity, and overall performance.

However, since cryptocurrencies are volatile and risky, they’re not particularly popular among most consumers. It’s going to be a while until they become widely accepted, if ever.

So, you can use crypto as a payment solution, but make sure it’s not the only one. Otherwise, you could risk losing most or all of your customers, who may not like the uncertainty of crypto or the lack of regulatory options for resolving potential problems.

Don’t Risk It with Cannabis Credit Card Processors

There are numerous providers who offer cannabis credit card processing solutions, based on P2P (Point to Point) technology (similar to PayPal or Venmo). However, their fees are typically high, not to mention that implementing their solutions could get you into legal trouble.

Cannabis is still federally illegal and classified as a Schedule I substance under the Controlled Substances Act. That’s why major credit card companies prohibit cannabis credit card payments.

If you don’t comply with federal law, you could face financial and criminal penalties. Some examples include hefty fines, an account freeze, an active lawsuit, or getting on the Terminated Merchant File (the TMF puts a five-year restriction on accessing credit card services).

You could lose a lot of profit until you’re back in legal waters and risk losing your license or shutting down your business.

Bottom Line

Accepting credit card payments at your cannabis dispensary may be tempting, but it’s not worth the risk. Stick with the legal cannabis payment solutions above and support your business’s long-term growth.


Author: Shane Dwyer
Shane Dwyer is a cannabis advocate who isn't afraid to tell the world about it! You can find his views, rants, and tips published regularly at The 420 Times.

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