The Green Sheet Online Edition
June 22, 2026 • 26:06:02
Cannabis - plenty of interest but tough sell
The U.S. Department of Justice and the Drug Enforcement Agency are taking a new stance on medical marijuana: they have scheduled hearings beginning June 29, 2026, to consider a "timely and legally compliant pathway" to federal legalization.
"There's definitely an appetite for this market," said Dee Karawadra, president and CEO of Impact Pays. But ISOs and agents eager to tap into the cannabis market—estimated to generate as much as $44 billion in yearly sales—continue to be forced to sell workarounds to traditional credit card acceptance.
As it stands now, the card networks, along with many banks and credit unions, continue to avoid businesses tied to the cannabis industry because marijuana remains illegal under federal law. The impact extends beyond dispensaries to software and service providers, and even employees working for legal ancillary businesses.
In testimony submitted to the Senate Banking Committee during a Feb. 5, 2025, hearing on debanking practices, Flowhub founder and CEO Kyle Sherman described the financial challenges facing his company. Flowhub develops compliance and retail management software for state-licensed cannabis dispensaries but does not sell cannabis products directly.
Sherman told lawmakers that one of Flowhub's senior engineers was denied a mortgage by a credit union in January 2025 "simply because of the source of his income," nearly costing the employee's family the home they were attempting to purchase.
In addition, the company said it has been "debanked multiple times" despite operating as a federally legal technology provider. In its written testimony, Flowhub stated that the account closures caused "major business disruptions, including nearly missing payroll, as we scrambled to implement temporary stopgap solutions."
Flowhub further told lawmakers that some of its customers are still forced to pay by money order because traditional financial institutions refuse to provide basic depository services to businesses associated with the cannabis sector.
Reclassification brings hope
The Biden and Trump Administrations both took steps to reclassify cannabis under the Controlled Substances Act. In August 2023, the Department of Health and Human Services recommended that cannabis be rescheduled under the CSA, and the Drug Enforcement Administration proposed a rule change in May 2024 that would do that.
The rule change, which elicited more than 42,000 comments, would apply only to state-licensed medical marijuana products. Recreational cannabis uses would remain off limits. In December 2025, President Trump issued an executive order rescheduling state-licensed medical marijuana sales and a hearing process to consider a broader rescheduling that would include recreational uses.
In April 2026, Acting Attorney General Todd Blanche issued an order immediately placing marijuana products approved by the Food and Drug Administration and products covered by state medical marijuana laws under Schedule III of the CSA. Previously, cannabis was classified as a Schedule I substance, on par with heroin and LSD. Schedule III drugs have legitimate medical uses and include products like Tylenol with codeine.
One of the most significant benefits this change provides dispensary operators is that they should now be able to deduct business expenses on their federal tax returns, lawyers have noted.
Ryan Hamlin, CEO and co-founder of POSaBIT said he was encouraged by the government's actions.
"We continue to believe the regulatory environment is moving in a positive direction and could ultimately create meaningful opportunities for cannabis operators, technology providers and financial services companies like POSaBIT," Hamlin said in a statement accompanying the firm's first quarter financial results. POSaBIT specializes in POS and payment solutions for cannabis dispensaries, and built a software platform specifically for cannabis producers and processors.
"Perhaps most importantly, industry conversations around the future potential for broader credit card processing capabilities continue to become increasingly optimistic," Hamlin noted. "While there is still work to be done on the regulatory side, we believe the long-term direction is very positive. If traditional credit card acceptance eventually becomes available to the credit card industry, it would be a true game changer for both retailers and companies like POSaBIT."
Even with all the legal uncertainties surrounding cannabis, companies serving the industry are faring well. POSaBIT, for example, reported a 29 percent gross profit increase in the first quarter of 2026 over the same period last year.
Green Check Verified, which connects cannabis businesses and cannabis-friendly FIs with a technology platform that includes payment acceptance and advisory services, reported more than $1.7 billion in average monthly verified deposits in 2025, representing 54 percent year-over-year growth. It also expanded its client base of cannabis-related business by 35 percent to total more than 17,500.
"This is a market that is starting to normalize," said Mike Kennedy, Green Check's chief strategy officer.
Banks continue to be leery
True normalization will require unobstructed access to FIs. While cannabis is legal (for medicinal and/or recreational uses) in 40 states and the District of Columbia, FIs that want to accept deposits and process payments for cannabis businesses must file paperwork with the Financial Crimes Enforcement Network, whose job is to root out money laundering and other financial crimes.
Just over 800 of the 10,000-plus FIs in the United States have done so, according to FinCEN. Most of those are community banks and credit unions that contract with third-party technology providers to support FinCEN-required reporting.
Meanwhile, legislation has been introduced in Congress, with bipartisan support, that would pave the way for more FIs to work with cannabis businesses. The SAFE Banking Act (in the House) and the SAFER Banking Act (in the Senate) would provide safe harbor to state-licensed dispensaries from federal penalties or loss of deposit insurance and exemptions from anti-money laundering laws.
In its statement to the Senate Banking Committee last year, Flowhub urged lawmakers to act on the legislation, asserting that "despite its rapid growth and economic contributions, the industry remains stifled by banking discrimination."
Will that be cash, ACH or debit?
According to a survey by MJBusiness Daily, the typical dispensary generates about $2 million in sales yearly. Cash is the predominant form of payment, but there are non-cash alternatives. One of the most popular is pay-by-bank. Most pay-by-bank offerings leverage the fintech Plaid, which routes payments through the ACH. However, this appears to violate Nacha rules. (Nacha is the rule-making authority for the ACH.) "Under the Nacha rules, organizations and processors agree not to originate payments that violate the laws of the United States," a spokesperson told The Green Sheet.
Another popular payment method is cashless ATMs, a PIN debit solution in which the POS device emulates an ATM. Mastercard and Visa rules prohibit the routing of cashless ATM transactions through their networks. Visa has taken an especially hard line. According to published reports, it levied a $950,000 fine on Colorado-based Pueblo Bank & Trust in 2024 for processing cashless ATM transactions through its network.
Patti Murphy is senior editor at The Green Sheet, president of ProScribes Ink (www.proscribes.net) and self-described payments maven of the fourth estate. Her Today in Payments reports are a regular feature of the Merchant Sales Podcast.
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