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Aug 13, 2023

Pot shops switch to cash after ATM crackdown

BOSTON — Pot shops across Massachusetts are scrambling to find alternative ways

BOSTON — Pot shops across Massachusetts are scrambling to find alternative ways for customers to pay after several networks that supported a workaround to federal banking restrictions were recently shut down.

The crackdown, first reported in Bloomberg News, involves some of the nation's largest processors of "cashless" ATM transactions which allowed cannabis buyers to use bank cards. Many have cut off the ability of companies to use their services for pot sales.

Dispensaries in Arizona, California and Massachusetts have experienced outages and are now recommending that customers use cash. Large dispensary chains of multi-state operators have also been affected, Bloomberg reported.

It's not clear exactly how many Massachusetts dispensaries have been impacted by the shutdowns.

INSA, which has recreational dispensaries in Salem, Springfield and Easthampton, posted a notice on its website informing customers that is no longer accepting the transactions, but pointed to cash and other third-party payment options, as well as gift cards.

At the company's Salem store, ATM machines at the checkout counters have been removed and a sign in the window said "cash only" due to "industry" issues.

Wakefield-based Curaleaf Holdings Inc., which operates more than 140 dispensaries in 21 states, is telling customers at some locations that it's unable to accept bank cards.

Earlier this year, Visa issued a warning that cashless ATMs that are used by many cannabis dispensaries violate its service rules. The company threatened "compliance enforcement" at "merchant outlets" across the country.

Massachusetts voters legalized marijuana in 2016 and since then the state's cannabis industry has exploded, with annual retail sales of more than $4 billion, according to the data from the Cannabis Control Commission.

More than 267 retailers are authorized to sell recreational cannabis, from Boston to the Berkshires, not including cultivators and micro businesses attached to the industry.

Dozens more companies are planning to open or are actively seeking licenses from the state to open for business, according to regulators.

But the drug remains illegal under federal law, and the nation's credit card companies and banking system has been reluctant to authorize transactions involving cannabis sales, even in states like Massachusetts where it's legal.

To get around that cashless ATMs, also called "point of banking" systems, allowed cannabis buyers to use a bank card instead of cash at stores that offered it.

The workaround has moved $7 billion past money-laundering controls of the banking system — accounting for about a quarter of all cannabis sales nationally, according to pot industry figures.

In Congress, the cannabis industry is pushing for approval of the SAFE Banking Act that would provide "industry-standard payment options" for cannabis buyers.

Christian M. Wade covers the Massachusetts Statehouse for North of Boston Media Group's newspapers and websites. Email him at [email protected].

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