By clicking “Accept”, you agree to the storing of cookies on your device to enhance site navigation, analyze site usage, and assist in our marketing efforts. View our Privacy Pprivacy poprivacy policy for more information.
Cannabis Legal Status

Cannabis Legal Status and its Impact on Cannabis Payment Solutions

Legality depends on the state and regulations are changing all the time. Learn what payment options are available to cannabis dispensaries, growers, B2B, and the entire supply chain.

Updated:
July 6, 2022
by
Cannabis Legal Status and its Impact on Cannabis Payment Solutions

Introduction

The Controlled Substances Act of 1970 made the possession of cannabis for any purpose federally illegal. Nonetheless, the Federal Government has begrudgingly permitted individual states to establish their own laws surrounding medical and recreational cannabis. The classification of cannabis as a Schedule 1 Drug creates legal complications, especially for cannabis enterprises operating near state borders or across state lines.

In 1996, California became the first state to legalize the use of medicinal marijuana. Since then, 35 other states have followed suit. In 2012, Colorado and Washington became the first states to legalize adult recreational use of cannabis. Currently, America sees states continue to flip rapidly and fully legalize (medical and recreational) cannabis. According to the Pew Research Center, "More than 43% of American adults are living in states that have embraced full legalization."

From the very beginning, cash was overwhelmingly the dominant form of payment, both because of the federal illegality of cannabis and because "Cash is King." Cannabis businesses typically would have their customers make cash withdrawals from an in-store ATM and would not accept any form of credit or debit card.

During the COVID-19 pandemic, the cannabis industry experienced explosive growth and dispensaries started moving away from cash in higher numbers to avoid the spread of illness and the change shortage. While America slowly returns to normal after the COVID-19 pandemic, consumer’s preference for digital payments versus money has remained. Digital payments are quicker, cleaner, and more convenient.

Does hemp have the same nuances surrounding cannabis legalization and payment processing that businesses should be aware of?

Hemp

Through the passing of the 2018 Farm Bill, the cultivation of industrial hemp, classified as cannabis containing .3% or less of the psychoactive 'euphoric' chemical tetrahydrocannabinol (THC), is federally legal.

All mainstream credit cards and payment methods are compliant for purchasing hemp-derived, non-Cannabidiol (CBD) products, i.e., hemp seeds and fiber.

Hemp-Derived CBD

CBD is the prominent non-intoxicating chemical, with multiple potential therapeutic benefits, found in both hemp and cannabis. Though the Farm Bill federally legalized industrial hemp cultivation, the regulations around the sale and purchasing of hemp-derived CBD products vary from state to state.

Where permitted, consumers can purchase CBD products with all mainstream credit cards.

Additionally, major eCommerce platforms such as BigCommerce, WooCommerce, and Shopify make it possible for licensed businesses to sell CBD products online and accept mainstream payments.

Yet, there are still nuances around selling these hemp-derived products compliantly. One nuance surrounds hemp-extracted delta-8 THC, a euphoric compound that through a loophole, its federal legality remains hazy. Since the Farm Act allows the growing and extracting of industrial hemp, delta-8 is possibly legal in states where cannabis is still banned. As there isn’t significant research around delta-8 and it is currently unregulated, some states have outright banned Delta-8 THC, with others considering or updating their laws to regulate the compound.

Cannabis - Medicinal and Adult Recreational Use

Is there any difference legally between Medicinal Cannabis and Adult Recreational Use?

Currently, medical marijuana is legal in 37 states, the District of Columbia (D.C.), and four U.S. territories. As of January 2022, cannabis is fully legal (meaning, medicinal and recreational) in 18 states, D.C., and two U.S. territories (Guam and the Northern Mariana Islands).

Legal recreational states include:

  • Alaska
  • Arizona
  • California
  • Colorado
  • Connecticut
  • Illinois
  • Maine
  • Massachusetts
  • Michigan
  • Montana
  • Nevada
  • New Jersey
  • New Mexico
  • New York
  • Oregon
  • Vermont
  • Virginia
  • Washington

Several states fully legalized cannabis in 2021, with more expected to propose and pass some form of legalization legislation in the foreseeable future. See our guide on The Future Legal Aspects of Cannabis Payments.

Yet until federal reform legalizes cannabis or removes cannabis as a Schedule 1 controlled substance, all major credit card networks will continue to prohibit their customers from using credit cards for cannabis payments. Shopify directly prohibits the sale of any product derived from cannabis, including marijuana-derived CBD.

Cannabis Legalization Map 2022

In general, the cannabis industry currently has a lot of momentum. When taken to a vote, most cannabis legal initiatives have resulted in the statewide legalization of cannabis.

All guides
Demo

Seeing is believing.

We’re happy to show you our full payments solution and put the best bank-to-bank transfers to work for your business.

Let's book a demo

Book a demo
Book a demo with Aeropay
Just 15 minutes
Specific to Your Business
No tech experience needed

All guides