In a February 19 complaint filed in Arizona state court, Texas-based payment processer Switch Commerce LLC argued that multistate cannabis operator Trulieve Cannabis Corp. and its affiliates should be responsible for a $950,000 fine from Visa for their alleged fraudulent use of "cashless ATMs" — not Switch.
Specifically, Switch alleges that the Trulieve defendants fraudulently "mask[ed]" point-of-sale marijuana transactions as ATM cash withdrawals, knowing that card payment network providers like Visa have rules expressly forbidding these types of transactions because marijuana remains illegal federally.
Marijuana's continued status as a Schedule I controlled substance under the federal Controlled Substances Act presents enormous challenges for dispensaries in accessing traditional banking services. This includes the inability to sell products to customers through credit and debit card transactions. In general, banks, card networks, and payment processors do not want the legal risks associated with aiding and abetting transactions involving controlled substances, which is prohibited under federal law. That leaves dispensaries looking for workarounds.
ATMs have been the most common solution. Visit any dispensary today and you are likely to see an ATM somewhere on the property that gives customers ready access to cash to make their purchases. Because the cash could be used for any purpose, any cash withdrawals from such ATMs are not directly linked to marijuana sales. Some dispensaries further mitigate their risk by ensuring that the ATMs are located outside of the licensed marijuana premises entirely.
Read more at Regulatory Oversight