In a blow to the struggling cannabis industry, Mastercard has told banks to block marijuana transactions on its debit cards, Bloomberg reported.
Despite being legalized to varying degrees in 38 states, marijuana is still illegal under federal law, leading most major banks to shun the cannabis industry.
"As we were made aware of this matter, we quickly investigated it," a Mastercard spokesperson told Bloomberg. "In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connect them to Mastercard to terminate the activity.
"The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems," the spokesperson added.
Companies that facilitated PIN debit payments for marijuana received cease-and-desist letters from Mastercard last week and are now struggling to offer dispensaries alternative solutions, a person familiar with the matter told Bloomberg.
Visa has also made efforts to crack down on cannabis purchases made on its networks. According to the Daily Mail, the company sent a memo to banks in 2021 stating that cashless ATMs, which were used as a workaround by marijuana businesses, violated its rules. Cashless ATMs allowed people to use a bank card while the transactions were reported as ATM withdrawals.
Experts say Mastercard's move comes as a blow to an industry already on the fringes of the financial system.
Josh Glasstetter, spokesperson for the US Cannabis Council, told The Washington Post that the estimated $30 billion the industry is expected to take in this year would "overwhelmingly" be generated through cash transactions, which could put workers at risk by inviting robberies.
"State-legal cannabis businesses are locked out of most banking and financial services," Glasstetter said. "The announcement by Mastercard is a powerful reminder of the need for action by Congress."
Last year, Sen. Patty Murray, D-Wash., spoke out against the lack of banking options for the cannabis industry amid a spate of dispensary robberies in her home state.
"It makes absolutely no sense that legal businesses are being forced to operate entirely in cash, and it's dangerous — and sometimes even fatal — for employees behind the register," Murray said at the time.
The Senate Banking Committee held its first hearing on the Secure and Fair Enforcement (SAFE) Banking Act in May, which seeks to make it easier for the cannabis industry to access banking services.
The bill would shield banks and their employees from being penalized for providing services to cannabis businesses in states where marijuana use is legal.
Earlier this month, however, Sen. John Cornyn, R-Texas, called the plan to pass a banking bill for the marijuana industry "wishful thinking."