Medical Marijuana

Government Leans on Payment Processors To Hurt Medical Marijuana Industry

IRS threats are turning the business into a cash industry


Eighteen states and the District of Columbia have legalized medical marijuana, and some dispensaries enjoy millions of dollars in annual sales. However, such establishments may not be ideal clients for ISOs unless they and their sale agents exercise caution, say those who work with the medical marijuana industry.  

Dispensaries are facing increased resistance from federal authorities and the major card brands, making maintaining banking relationships and obtaining merchant transaction services more difficult.

"Over the course of the last seven years, despite the fact that we are an excellent financial services customer, we've had our bank accounts closed four times and our merchant services processing closed more times than that. I don't even remember how many times it's happened," says Steve DeAngelo, co-founder and executive director of Harborside Health Center, the country's largest dispensary, which has locations in Oakland and San Jose, Calif.

(H/T NP Complete)

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  1. The Controlled Substances Act existed in a constitutional gray area so long as all 50 states outlawed all the substances the CSA prohibits.

    The 10th and 21st amendments are very clear about where the authority to regulate, restrict and outlaw intoxicants resides, and it’s not with the feds. But the 21st amendment does allow the feds to stop shipments of alcohol into states that prohibit it, and this has been stretched semi-constitutionally to cover all intoxicants.

    But what happens when a state legalizes marijuana with or without a prescription? Suddenly the CSA no longer applies within that state, so long as state law is satisfied.

    Can the government get into trouble for interfering with lawful businesses when there is no law prohibiting those businesses? Last I checked, they can’t legally do things like that.

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