At least two New Mexico cannabis companies have lost one of their primary methods to take payments from customers amid a nationwide crackdown on so-called “cashless ATMs,” a digital transaction process that has kept weed shops off banks’ and credit card companies’ radars as the plant remains federally illegal.
Other New Mexico dispensaries are bracing for an abrupt shift in what’s allowed for a transaction, too.
Ambiguity in federal law has pushed dispensaries to get creative with cash alternatives, but until Congress acts on a perpetually in-limbo fix, some cannabis companies will likely have to continue putting themselves at risk by primarily dealing with large stacks of bills or setting up a traditional debit-style system with their respective banks.
PurLife, a New Mexico cannabis company that predates the Cannabis Regulation Act, the state’s adult-use law, on Wednesday sent a notice to its customers announcing the company would revert back to only accepting cash.
“Sadly, an industry wide shutdown of debit solutions has taken place and we are no longer able to process debit transactions,” the notification reads.
Indy White, PurLife’s vice president of operations, tells SFR the problem seems to stem from a memo Visa issued a year ago warning against cannabis businesses engaging in cashless ATM transactions.
“Visa really was pushing back on this cashless ATM, specifically for the cannabis industry,” White says.
Ben Lewinger, director of the New Mexico Cannabis Chamber of Commerce—of which PurLife is a member—confirms that at least one other company saw issues with digital payments, but that representatives declined to comment or issue a statement.
Cannabis banking has long posed a conundrum in states that have legalized both medical and recreational use. Many companies for years have only accepted cash as a way to avoid scrutiny from the federally regulated bank and credit card industries. Cashless workarounds have done the trick for the most part.
Cashless ATM transactions—a common practice among dispensaries—amount to a customer authorizing a cash withdrawal from their bank account as if they were using an ATM. The amount is generally rounded up to the nearest $10 or $20 increment. But instead of getting cash in hand from a physical ATM, that money is applied to a purchase and the balance is handed back to the customer.
The cashless ATM trend has spread across the country where cannabis sales are legal, but according to recent reports many states have seen an abrupt halt to those kinds of transactions. Going cashless for many dispensaries is more than an issue of convenience for customers, but also a concern of employee safety. According to the New Mexico Cannabis Control Division, the average cannabis transaction in the state ranges from $40 to $50, meaning dispensaries could be sitting on a sizable amount of cash at the end of a given day.
White says PurLife had a “big meeting” on Wednesday about the apparent abolition of cashless ATMs hours before it happened to them.
“Two hours after our meeting, we got notifications from store, by store, by store, that they’re getting error messages, ‘client not found,’ or something like that,” White says. “So, it happened way sooner than we were expecting.”
Marijuna Moment last year obtained a memo from Visa warning against these types of transactions, characterizing them as “a scheme” by businesses unable to work with traditional financial institutions.
Jesse Swingle, director of marketing for POSaBIT, a Seattle-based point of sale and payment processing company for dispensaries, tells SFR the company quickly warned clients of the possible death of cashless ATM transactions shortly after Visa’s memo.
“We went and started proactively calling all of our customers and saying, ‘Hey, the writing’s on the wall here. We’re not sure how long this is going to last. We’re strongly pushing everybody to shift over to this PIN debit solution ASAP,’” Swingle says. “We had no idea that it was going to be a year. At the time, we were thinking this could be any day.”
Since then, POSaBIT began offering the more traditional debit transactions that require a PIN and don’t seem to be attracting the critical eye of banks and credit card companies, Swingle says.
“It’s basically switching over to the exact same interaction you would have like at a 7-11,” he says.
The industry-wide assumption is that the shutdown is directly tied to the credit card company’s warning, Swingle says, though he isn’t certain. He says Visa did not contact his company, but POSaBIT started noticing last week a large percentage of transactions failing among its dispensary clients.
Visa did not respond to SFR’s interview requests.
A number of New Mexico cannabis company heads tell SFR they were unaffected by the elimination of cashless ATMs, but not all are convinced they’re completely in the clear.
Len Goodman, a New Mexico cannabis industry veteran, says his company, Best Daze, which has locations in Santa Fe, hasn’t seen any problems with accepting card payments.
“Just the fact that we checked and our guys are saying it’s OK, doesn’t mean it’s not going to change tomorrow,” Goodman says.
Zeke Shortes, who runs Sacred Garden, another Santa Fe dispensary, says he’s heard warnings from cannabis businesses in Las Vegas, Nevada about the payment snafu, but has not seen it first-hand.
Principals of both Ultra Health and Everest, as well as a spokesperson for R. Greenleaf say they have not experienced any major problems with digital payments in recent days.
Dan Pabon, a former Colorado state legislator and current legal counsel for Schwazze, the parent company of R. Greenleaf, tells SFR the ultimate solution is for Congress to pass the SAFE Banking Act, which aims to clear the way for above-board cannabis banking. The US House has passed versions of the legislation half a dozen times in recent years, but the US Senate on Wednesday removed the act from a national defense bill, essentially leaving it in the lurch.
“This requires a federal solution, and I think that’s the only way we’re going to get clarity on the issue,” Pabon says. “I have been working on legislation and regulation in this space for 10 years and I’ve seen almost every attempt to get parity to cannabis companies at the state level, and I’ve not seen one succeed. Let’s put it that way.”
White says PurLife is beta-testing an ACH, or money transfer, app as a cash alternative, but he agrees the long-term solution—other than running a cash-only business—is at the federal level. But he’s also pessimistically realistic.
“Hopefully we get something by the end of the year,” White says. “I mean, that’s very, very unlikely, but that’s about what it will take, is literally an act of Congress.”