What makes CBD business a special case?
CBD stands for cannabidiol and it is the less active ingredients of cannabis (marijuana). Cannabis has for many years been treated as an illegal Schedule I drug and it could not be sold in any market, including over the internet. It is really CBD’s sister ingredient THC that puts cannabis onto the banned list.
Everything changed in 2018 when President Trump signed the Farm Bill into law legalizing hemp, which is a type of plant totally without THC, and with very low levels (typically less than 0.3%) of cannabidiol. Before the change, “hemp” was generally used to describe a non-intoxicating plant of the genus Cannabaceae that has been harvested for the industrial use of its derived products, which can be to produce crucial resources such as food, rope, clothing, paper, housing material etc.
Prior to this law, hemp itself, and CBD extracted from it, were both classified as parts of the Federal Drug Enforcement Administration’s list of banned substances. As a result, in setting up business to market CBD oils and related products, some special conditions kick-in.
Immediately after the change in the laws, there was a massive growth in levels of business and demand for merchant accounts for CBD. However, most of the banks refused to provide these services, and within a very short time, more than 90% of total accounts supported came from a single CBD payment processor, Elavon Inc., a subsidiary of U.S. Bancorp. However, very shortly afterwards, they decided that the risks were too great, and dropped this service, leaving just a single provider available to support the whole US market.
The CBD rules and regulations will continue to change and evolve as the culture, landscape, and markets continue to adjust. This potential of change creates a lot of uncertainty among more traditional service providers such as merchant account banks. If you want to move forward and accept credit and debit cards, you must find a merchant accounts for CBD service that fully understands and deals with all aspects of CBD business.
The whole scope of the trade is flagged as being “high-risk”. CBD is not the only kind of business flagged as high-risk and It shares many of the problems in setting up banking and merchant accounts. You can get a better picture of what high-risk means here:
How to setup banking for a CBD business