Farm Bill plants seeds for legal cannabis payments

Hostilities toward the legal U.S. cannabis industry are softening considerably, with signs of further removing cash and digital workarounds from a market that has long been shunned by traditional payment cards.

The most recent boost comes from an agriculture law, commonly called the 2018 Farm Bill, which President Trump signed into law on Thursday. The law legalizes hemp, greatly expanding its potential uses. While it did not affect the federal ban on marijuana, which is still on the list of prohibited narcotics, the law is still a welcome sign for agricultural banks, which had been wary of funding hemp farming.

This should have a downstream impact on cannabis payments, where a nascent market is building for e-commerce and debit cards.

“De-scheduling hemp will encourage financial institutions to begin offering mechanisms for non-cash payments in the cannabis industry,” said Tom Zuber, a partner at Zuber Lawler & Del Duca, a Chicago-based law firm. “The introduction of non-cash payment solutions will in turn help to fuel the continued maturation of the global cannabis market. These are very exciting times.”

The farm act isn’t the only positive political wind. Politicians from both parties are supporting a “safe harbor” for financial institutions in legal cannabis states. Recreational marijuana is legal in 10 states and medical marijuana is legal in 33.

The playing field for cannabis payments is still not unlimited, but it’s growing quickly. Michigan, Utah and Missouri legalized cannabis sales in the fall election, and Jeff Sessions — a longtime opponent of legalizing marijuana — resigned as attorney general shortly after.

Sessions was seen as a cannabis hard liner with a stricter stance than even President Trump. His departure had an almost immediate impact on the cannabis market. Other developments include former House Speaker John Boehner joining the board of a dispensary, and the major U.S. card networks participating in Canada's recreational cannabis market.

“Banking and banking services are going to become more available to those CBD businesses covered under the Farm Bill,” said Dustin Eide, CEO of CanPay, adding his company is now able to assist hemp-derived CBD businesses in gaining access to direct merchant accounts. CDB, of Cannabidiol, is a cannabis compound that has medical benefits but does not make users feel "stoned."

CanPay provides a closed-loop debit payment system for cannabis. It recently partnered with Jane Technologies, which operates an online cannabis marketplace, to form a cannabis e-commerce service the supports order-ahead, in-store pickup and delivery.

That's a major evolution from cannabis payments’ past, which was dominated by cash-only payments and other workarounds to card payments.

"Non-cash payments benefit everyone, as such it simply needs to be pushed forward; no one is really pushing back anymore," said David Ehrlich, COO of Zodaka, a digital payments company.

The trend is also global. In addition to Canada, some of the fastest growing legal cannabis markets are outside the U.S., supporting a potential international payments market and leading to a substantial spike in global revenue in the years ahead.

In addition to payments, this will impact merchant activities that are often tied to payments, such as advertising, CRM and analytics. This can help dispensaries and other companies reach the right audience, and also mitigate risk by ensuring age limits are adhered to, said Josh Segal, CEO of AdLoop, a digital advertising company.

“The advertisers will be able to see exactly where their ad spend goes, allowing them to hone in and focus on conversions,” Segal said. “These new advertising technologies will not only allow cannabis businesses the ability to advertise, but ultimately bring more money into the cannabis industry.”