It’s Time We Give CBD Businesses the Credit They Deserve

By Josh Hall

Something tells us that credit card processing providers hamstringing CBD companies wasn’t exactly what writer and historian James Truslow Adams had in mind when he coined the phrase “American dream” in 1931. After all, he did write, “Life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement.” But a vendor who once gladly offered credit card processing pulling the rug out is just the latest hurdle to overcome for hemp-based businesses.

When President Trump signed the Agriculture Improvement Act of 2018, also commonly known as the Farm Bill, many assumed it would bode well for the future of businesses dealing in hemp. The bill was supposed to pave the way for farmers, brands, and consumers to make, sell, and buy hemp-derived products as they wished.

While the Farm Bill has loosened up some restrictions, others remain as tight as ever. For instance, the U.S. military continues to caution its servicemembers about using CBD products. And credit card processors like Elavon have abruptly stopped handling transactions for many CBD businesses.

Why the hesitance over CBD?

The best guess why a processor would avoid working with a hemp-based company is fear of the unknown. While CBD that falls below the 0.3% threshold is legal on the federal level (again, thanks to the passage of the Farm Bill), it’s likely that these companies still view the legal status of CBD as murky at best. Idaho, Nebraska, and South Dakota have laws in place that reference hemp-derived CBD products as illegal, or there’s legislation on the books that leaves it open to interpretation. There are also 10 states that allow for both medicinal and recreational cannabis use, regardless if the product has THC or not. It’s those types of state-by-state variables that make oversight hard for a processor.

The little guy loses again

Despite what seems like firm rules on behalf of the processors to disenfranchise from any and all retailers selling CBD products, it turns out it doesn’t apply to the big boys. In January, high-end retailer Neiman Marcus announced it would roll out an assortment of CBD-infused beauty products in select stores—including its glitzy brick-and-mortars in Beverly Hills and Orange County, California—and on its website. DSW, most known for its discount-priced shoes, also announced in January that it would begin selling beauty products that feature CBD as part of a plan to diversify offerings for customers beyond just footwear.

While we’re big fans of CBD-infused beauty products, and are certainly in favor of these beneficial goods making their way to the masses, we can’t help but take note of the hypocrisy. Because the last time we checked, Neiman Marcus and DSW still took credit cards.

It’s hip to be Square

If you’ve ever purchased food from a food truck or bought something at a farmer’s market, there’s a good chance you’ve used Square. The small device that looks strikingly like a product designed by Apple actually can plug into a smartphone—but more importantly, it provides a way for merchants to take credit cards at the point of sale. However, that hasn’t always been the case when it comes to retailers peddling CBD.

Square has historically taken a conservative stance with these products by not supporting sales, even after the passing of the Farm Bill. But then, in late May, a beacon of hope appeared. Online news outlet, The New Consumer, broke the story that Square was rolling out an invite-only pilot for CBD merchants. Industry groups universally applauded the move, notably the National Cannabis Industry Association. That group’s media relations director was quoted as saying, “Forward-thinking companies are stepping in to fill the gap created by outdated federal banking policies, and helping address the problems caused by a lack of financial services in the cannabis industry. Lawmakers should take heed and open this space to all financial institutions.”

Political supports gains momentum, stalls

The timing of Square’s foray into building relationships with CBD retailers certainly made sense. Just a few months prior, industry experts were celebrating what some considered a monumental victory as a congressional committee approved legislation aimed at increasing marijuana businesses’ access to banks. The legislation intended to protect banks from penalties if things went south with one of these merchants, and, ideally, meant that CBD companies would soon have their pick of banks and processors. Months later, there has been no further development, and many CBD companies are stuck operating as a cash-only business.

Hope for the future

The word “blockchain” is something many of us have heard on TV or read in a magazine, but few understand precisely what it means. And that’s because it’s incredibly complicated—but it also might just be the future of banking for CBD businesses.

We’ll try to keep the tech talk to a minimum, but here’s the basics for how blockchain works. It essentially involves a digital wallet (kind of like a bank account), but these wallets are only issued to companies that pass strict background checks. There’s also a ledger that keeps track of every cent that goes in and out of the wallet. And here are the really cool parts: Not only does the ledger record transactions in real-time, but it can add geolocation descriptors to each sale. That means a blockchain ledger could read the geolocation of a wallet attempting to purchase CBD, and if it was originating from a state in which CBD was illegal, it could immediately decline the transaction. We’re still a ways from this rolling out to mainstream merchants, but the promise is exciting.

American dream 2.0

James Truslow Adams died about 15 years before an Israeli chemist named Raphael Mechoulam first isolated CBD from the cannabis plant (fun fact: Mechoulam is still alive and still very active in cannabis research and activism at age 88). But in his signature work, The Epic of America, Adams painted the picture of how the country’s sordid past helped mold it into what it was in 1931. We’ve come a long way since the 30s, and so have our beliefs in the power of natural remedies like CBD.

We all don’t want the sports car, corner office, and three-piece suit, but no one wants to live a life of pain, or one with anxiety, seizures, or cancer—and science tells us CBD may help. And it doesn’t get much better, richer, or fuller than that.

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