Mastercard Inc. has taken a firm stance against the legal marijuana industry in the United States, demanding that financial institutions block cannabis purchases on its debit cards. This move has dealt another setback to the already struggling industry.
Bloomberg News reported on Wednesday that Mastercard sent cease-and-desist letters to banks and payments processors involved in facilitating debit-card transactions for marijuana purchases. A Mastercard spokesperson revealed that the company quickly investigated the matter and instructed the relevant financial institutions to terminate these activities. The reason behind this decision is that the federal government still considers cannabis sales illegal, prohibiting them from being processed through Mastercard’s systems.
Although medical and recreational marijuana have been legalized in several states, cannabis retailers are currently facing significant obstacles accessing the U.S. financial system due to its federal illegality. As a result, most transactions in legal cannabis stores are limited to cash or debit cards.
The legal marijuana industry has been hoping for a breakthrough through the SAFE Banking Act, a bill in Congress that aims to open up the financial system to pot businesses. However, despite its progress, the bill still faces challenges in gaining sufficient support. Furthermore, analysts predict that major pot-legalization advancements are unlikely to occur in the U.S. within the next 18 months.
It remains unclear whether Visa Inc., which has previously cracked down on ATMs at cannabis dispensaries, will follow Mastercard’s lead and impose restrictions on debit-card usage at these establishments. The company has not yet responded to inquiries regarding this matter.
Mastercard is set to report its quarterly earnings before the opening bell on Thursday.