Access to banking services remains a major challenge for hemp companies

General banking services have not been the central impediment for hemp companies, but issues related to credit card processing have made commerce difficult for them.

In May of this year, leading merchant service provider Elavon discontinued services for businesses selling CBD products.  Retailers with broad product lines and minimal – but popular — CBD sku’s were also affected, when Elevon threatened to terminate their credit card processing services if they continue selling CBD products.  This may have slowed down retail CBD sales, a possible factor in the downward price trend in wholesale hemp derivatives like CBD Isolate.

At issue for Elavon and the banking industry as a whole, is the risk associated with their customers selling a product with unclear regulatory status.  CBD is widely sold, but it has not been approved by the FDA.  The FDA has shown no interest in preventing CBD sales at this time but has made clear statements about CBD ingredients in food products and health claims made by CBD retailers.  Read about this in last week’s FDA release:

https://www.fda.gov/consumers/consumer-updates/what-you-need-know-and-what-were-working-find-out-about-products-containing-cannabis-or-cannabis

Banks carry a major regulatory compliance burden and have taken a cautious approach to working with cannabis companies at large.  Elavon is a subsidiary of US Bancorp. Included in their portfolio of financial services is US Bank, whose brick and mortar locations were inundated with cannabis related companies looking for banking services.  Cannabis companies have by-in-large been forced to deal in cash, some of which showed up on US Bank’s doorstep for deposit.  Since marijuana is still federally illegal, US Bancorp will not expose itself to potential money laundering penalties.  This, along with CBD’s unclear status, and a reportedly higher rate of chargebacks, prompted US Bancorp to sever ties with hemp companies.

Not only CBD companies were affected by this trend.  Industry group US Hemp Roundtable was dropped by their processor Stripe in June, saying they were a “high risk account”.

Yesterday the Senate Committee on Banking, Housing, and Urban Affairs heard testimony from witnesses in the banking industry urging them to adopt the Secure and Fair Enforcement Banking Act (SAFE). The act has broad support in the House and offers the protections banks need to work with cannabis related companies.  The hearing was poorly attended, but this may be due to preparations related to the Mueller hearing today. The SAFE Banking Act will create a pathway for well over a billion dollars in proceeds annually from cash-based cannabis businesses into the US banking system.  The lack of accounting and potentially missed tax revenue opportunities are seen as significant motivating factors, but Senate support for this bill remains unclear for now.

Read more about the SAFE Banking Act here:

https://www.pymnts.com/bank-regulation/2019/pro-pot-safe-banking-act-hits-roadblock-in-us-senate/