Have you ever shopped for hemp CBD online and finally found the perfect product only to discover while checking out that the website doesn’t take credit card payments? You’re not alone!
Despite the passing of the 2018 Farm Bill legalizing hemp and hemp-derived products, including those containing CBD, major payment processors like PayPal and Square still won’t work with companies that sell these products. The reason is simply that they see hemp business as too risky. But if hemp is legal, then why is there still risk?
Cannabidiol, or CBD, may be derived from either hemp or marijuana, which are both varieties of the same plant species, Cannabis sativa L., but contain different levels of THC. Hemp contains less than 0.3% THC, while any varieties that contain more are considered marijuana. Hemp (and CBD from hemp) became federally legal last December when the 2018 Farm Bill became law. However, since marijuana is still considered a “Schedule I” drug and is thus highly illegal, payment processors are wary of companies claiming to only sell CBD from hemp but are really selling CBD or other products derived from marijuana.
“A patchwork of laws and regulations at the federal, state, and local levels make it very difficult for banks to identify legal hemp […]”
While the CBD molecule itself is the same whether derived from hemp or marijuana, which one it comes from determines its legal status at the federal level. Its legality also depends on the laws in each state. Several states like Oregon have embraced hemp and hemp-derived CBD, while others allow hemp cultivation but not for CBD (such as in WA up until this year), and some like neighboring Idaho still consider hemp and most hemp CBD products to be as illegal as marijuana, with a minimum sentence of up to five years.
Additionally, banks (and just about everyone else in the industry) have found it extremely challenging to keep up with ever-changing rules on hemp and CBD. A patchwork of laws and regulations at the federal, state, and local levels make it very difficult for banks to identify legal hemp companies operating in compliance from those that are not. This all equates to high risk that is difficult to manage and the kind of risk banks don’t like to take on.
“That’s not to say banks and payment processors aren’t interested.“
At the federal level the SAFE Banking Act, introduced in March of this year, would provide protections to the financial sector and other ancillary industries that provide services to legal cannabis (marijuana and hemp) businesses. The bill has a high chance of passing with bipartisan support, but as of this writing it awaits being scheduled for hearings in the House of Representatives. Equally important would be the FDA passing regulations on hemp CBD in foods and topical products, which would eliminate the last remaining legal ambiguity regarding hemp CBD products intended for human consumption.
That’s not to say banks and payment processors aren’t interested. Some mainstream payment processors like Stripe are opening up to hemp CBD merchants on an invite-only basis. However, the vast majority of retailers, especially smaller ones, don’t meet the often high minimum monthly revenue required by many processors and struggle to find reliable payment processing. Most retailers are forced to open high-risk accounts that charge rates as high as 10% per transaction and require long-term contracts with hefty early termination fees.
As of this writing, our own credit card processor has been down for over a week due to technical difficulties. (Sometimes good blog subjects are just handed to you.) We know some online retailers offer the ability to pay with e-check, but we don’t feel comfortable asking visitors to enter bank account information online, even if through our secured website. That means we can currently only accept cash or check, which is a significant inconvenience to our customers and hinders our business. We continue to look for a better long-term payment processing solution for Cascadia Hemp Co. and hope the day comes quickly when payment processing for legal hemp products is no longer a headache, so that we can focus on what’s most important: Promoting safe and effective hemp products while being a force for good in our community.
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