High Risk

CBD Payment Processing in a Post-2018 Farm Bill Marketplace

The 2018 Farm Bill marked the first time in nearly a half-century that industrial hemp was legalized by the US Federal Government. Specifically, the 2018 law legalized the plant Cannabis sativa and products derived from Cannabis sativa with a THC concentration not more than 0.3 percent by dry weight. Ever since, the CBD industry has literally exploded. Growing from $620 million in 2018 to an estimated $23.7 billion by 2023. With this explosive growth and demand, it's no wonder businesses across the United States are looking to have a stake in CBD.  Given the legalization of industrial hemp, and by default CBD, the obvious question to ask is: Why is CBD a high-risk industry for payment processing? To answer that, we need to take a step back to understand: 

  • Why industrial hemp was criminalized in the 1970s
  • The differences and similarities between industrial hemp and marijuana
  • Where the regulatory landscape currently exists. 

History of Hemp in the United States:

Hemp was first introduced in the United States in the early 1600s as a staple crop for producing rope, paper, and fuel. In fact, in 1916, the US Department of Agriculture found that hemp produced four times more paper than trees in the US. While the exact reasons for hemp's illegalization are unclear, the Marijuana Tax Act of 1937 spelled the beginning of the US's hemp industry's demise. Many people point to Andrew Mellon, Randolph Hearst, and the Du Pont family as critical players fighting to end hemp production. They all held significant stakes in paper manufacturing from wood pulp and saw hemp as a major competitor. Authored by Harry Anslinger, an infamous anti-cannabis prohibitionist and head of the Federal Bureau of Narcotics(FBN), the bill was opposed by the American Medical Association, pharmacists, and farmers across the country. In fact, during World War II, hemp demand was so high that farms running out of space in their fields often planted hemp in the ditches along roads.

While the 1937 bill didn't criminalize hemp, the trajectory toward criminalization was set. In 1967 Congress passed the Controlled Substances Act, which officially criminalized hemp as a schedule I controlled substance. Interestingly, the Shafer Commission – set up to help congress determine what substances should be classified in the 1967 Controlled Substances Act – recommended against this Congressional action and went so far as to publish a report titled "Marihuana, a Signal of Misunderstanding." It wasn't until 45 years later that the tide began to turn when Colorado and Washington became the first states to oppose federal laws and legalize the sale of cannabis.

Get approved for a high risk merchant account fast!

What's the difference between Hemp and Marijuana

The reality is that industrial hemp and marijuana are both cannabis, just like granny smith and red delicious are both apples. Similar to how apples are bred for different purposes like hard cider or a tasty lunch snack, hemp is cultivated for many other purposes. A critical part of understanding CBD and why it is considered a high-risk industry for payment processing requires understanding what type of hemp it is derived from and how it is sourced. As apples are classified based on many characteristics like sweetness, tartness, acidity, crispness, etc., hemp has thousands of variants based on the amount and types of cannabinoids each plant is bred to produce, such as CBD, CBC, CBG, and THC.

As a general rule, you can break hemp down into two main categories, Fibrous hemp, and CBG-rich strains. 

Fibrous hemp is fairly distinct and is most often considered industrial hemp. Fibrous hemp produces very few cannabinoids making it a poor choice for producing CBD. Its height often makes it quickly identified, growing over twelve feet tall and appearing significantly bushier than other hemp varieties. Fibrous hemp is currently used for an ever-expanding list of materials, from clothing and paper to environmental remediation and home insulation. As the popularity of farming this crop continues to grow, we look forward to seeing even more innovative applications.

CBG-rich strains of hemp are significantly more challenging to identify from one another. When most people think of marijuana, this is the family of hemp plants, most people envision. CBG is considered the "mother" of all cannabinoids as its the first primary compound produced by hemp plants. As a hemp plant matures, CBG is the base molecule that breaks down to become THC, CBD, CBC, and other minor cannabinoids. Depending on the plants' selective breeding, the quantity and ratio of these cannabinoids can vary considerably between strains and can only be determined with scientific testing. 

While CBD rich strains of hemp can contain a significant amount of CBD in each plant, between 15 and 20 percent by weight, very few CBD rich strains of hemp contain THC levels that meet the Federal requirements of 0.3% THC by dry weight. While CBD as a final product is legal, it is not until it is synthesized. This is why most hemp grown for CBG is grown in states that have legalized marijuana or have specific laws related to CBD production.

Current regulatory landscape. 

For banks and payment processors who are risk-averse, CBD continues to pose unique challenges. While the 2018 Farm Bill removes hemp-derived products from Schedule I status, it does not legalize CBD. And as we've already discussed, the legality of taking an illegal plant and making it legal remains murky. The basis for cannabis enterprises to continue to operate is currently based only on memoranda issued by the US Justice Department in 2013, known as the Cole and Ogden Memos. While indicative of the Federal Government's position – without legislation clearly defining CBD or its production as legal – CBD's place in the marketplace remains up to presidential discretion. 

Ready for some good news? BankCard Services has a wide range of experience working with high-risk merchants, and we understand the needs businesses in this industry face when it comes to CBD payment processing.

How Does BankCard Services Solve these Problems for CBD Businesses?

BankCard Services isn't your average payment processing organization. We understand the CBD industry and the regulatory issues surrounding it; that's why we specialized in high-risk payment processing in the first place. We can even help CBD businesses in the following ways:

  • Assist businesses in minimizing chargebacks with management tools and chargeback protection.
  • Help businesses fight chargeback disputes.
  • Aid businesses in guarding against fraud so fraudulent chargebacks aren't holding your profits down.
  • Offer transparent pricing without surprise fees and punitive monthly payments.
  • Allow businesses to accept all major credit cards.
  • Offer services to help CBD businesses accept payments in stores and online.

BankCard Services is committed to offering pricing that business owners can understand and rely on. This includes expert knowledge from specialists who understand the services we offer and how those services can benefit your business. Not to mention our affordable rates that won't cost your business an arm and a leg to accept credit card payments.

Why BankCard Services is the Clear Choice for CBD Payment Processing

BankCard Services was created to offer pricing transparency regarding merchant services fees, transaction fees, and other fees related to credit card and payment processing. We view each business relationship as a partnership and treat all our clients, regardless of industry, with respect. We want your business and will work hard on your behalf to keep it.

Our goal is to simplify the payment process for businesses and their customers. We believe this helps businesses avoid leaving money on the table due to complex payment processes. More importantly, we understand that all businesses are unique. We offer fully customizable and scalable products so that our services can grow right along with your payment processing needs.

When it comes to CBD payment processing, BankCard Services keeps up with the latest security methods to protect the information of CBD businesses and their customers. Companies that work with us for their payment processing needs never need to worry about things like PCI compliance or new safeguards no one has thought of yet. We take your protection seriously and deliver in the form of secure CBD credit card processing services. Contact BankCard Services today to schedule an appointment with a BankCard specialist. 

Stop planning and start earning. Talk to an agent now to start processing transactions. Start the Conversation.