Challenges for CBD Merchant Accounts

CBD products that make “unsubstantiated” health claims, in particular, may have fewer options when it comes to credit card processing. Let’s take a look at finding a CBD merchant account for your business.

• How is CBD different than marijuana?
• Is CBD legal?
  • CBD vs. Marijuana According to the DEA
• Problems for CBD Sellers
• What are “unsubstantiated” health claims?
• If my product doesn’t make health claims, can I get a regular merchant account?
  • Shopify’s Crackdown
  • Elavon Stops Accepting CBD
• Finding a Processor

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How is CBD Different than Marijuana?

Cannabidiol, or CBD, doesn’t get the user high. That’s an important distinction for many of its proponents, who want to use CBD to relieve medical ailments, not as a recreational drug.

However, when it comes to credit card processing, most companies don’t distinguish between CBD and marijuana. Unfortunately, there’s nothing you can do to change their minds. If a processing company tells you it can’t support your CBD sales, it’s best to continue your search.

Unfortunately, CBD will run into many of the same restrictions that apply to marijuana credit card processing, so it’s important to be aware of the limitations.

Is CBD legal?

Maybe.

At the heart of this question is the Controlled Substances Act (CSA), the statute that established U.S. drug policies. Manufacturing, importing or distributing, possessing, and using certain substances is regulated under the CSA. The Food and Drug Administration (FDA) and Drug Enforcement Agency (DEA) are in charge of which substances are added to or removed from the various “schedules” in the CSA.

The CSA has five “schedules” for different substances, with Schedule I being the most restrictive, and Schedule V the least restrictive. Schedule I substances are claimed to have a high potential for abuse, no current accepted medical use, and a lack of accepted safety for use of the drug under medical supervision. It includes drugs like LSD, MDMA (ecstasy), heroin, and – confusingly to some – marijuana.

Schedule V substances, on the other hand, are said to have low potential for abuse, have a currently accepted medical use, and, if abused, may only lead to limited dependence. Cough suppressants with codeine and similar products fall under Schedule V.

While the DEA has added certain CBD-containing epilepsy drugs to Schedule V, marijuana remains a Schedule I substance.

CBD vs. Marijuana According to the DEA

However, as mentioned, CBD isn’t exactly the same thing as marijuana. In fact, it may not fall under the CSA at all. A DEA internal directive states: Products and materials that are made from the cannabis plant and which fall outside the CSA definition of marijuana (such as sterilized seeds, oil or cake made from the seeds, and mature stalks) are not controlled under the CSA. Such products may accordingly be sold and otherwise distributed throughout the United States without restriction under the CSA or its implementing regulations.

In this paragraph, the DEA clearly indicates that products that don’t fall under the Controlled Substances Act’s definition of marijuana may be sold and distributed in the United States.

The DEA further states: The mere presence of cannabinoids is not itself dispositive as to whether a substance is within the scope of the CSA; the dispositive question is whether the substance falls within the CSA definition of marijuana.

This latter paragraph suggests that the presence of cannabinoids (CBD) by itself doesn’t determine if a product falls under the Controlled Substances Act. Rather, that determination is made by whether the product falls under the CSA’s definition for marijuana.

If you’re unsure where your product falls, consult an attorney or expert on the drug classifications.

Problems for CBD Sellers

As mentioned at the beginning of this article, one problem for CBD sellers involves “unsubstantiated” health claims. If your product makes a health claim that hasn’t been verified by the FDA, it will fall into the category of “pseudo-pharmaceuticals” where it isn’t an approved prescription drug but still claims to have benefits like prescription drugs.

Getting a CBD merchant account when your product makes health claims can be more difficult.

What are “unsubstantiated” health claims?

For the purposes of credit card processing, unsubstantiated health claims are claims that have not been evaluated by the FDA. Any suggestion that a product will positively impact health can be considered a health claim, even if the claim is as general as suggesting the product can decrease anxiety.

Some CBD companies suggest that their products help with ailments ranging from difficulty sleeping to inflammation. However, The Washington Post cautions that the scientific backing for CBD’s effectiveness is limited at this time. It does, however, suggest that there is preliminary evidence that CBD may help with seizures.

If my product doesn’t make health claims, can I get a regular merchant account?

Maybe. Unfortunately, CBD products by nature are likely to be considered “high risk” by credit card processors due to the uncertainty of legality and changing regulations. That makes it more difficult for a processor to ensure a business is complying with state and federal regulations.

Keep in mind that many of the “quick sign-up” style services prohibit CBD. Your account may originally go through, but will later be shut down when the processing company conducts internal reviews and finds out that you’re selling CBD. Save yourself the trouble and don’t sign up with any merchant service provider that prohibits CBD sales.

However, at the time of this update, Square currently supports CBD accounts. Its website explicitly references CBD sellers as an authorized industry, although those accounts do come with higher rates and fees.

If you’re not approved for other options, you may be able to obtain a high risk merchant account, but it will be at the processor’s discretion whether or not to accept your business. Offshore merchant service providers may also be willing to offer you a CBD merchant account, but remember that it will be more expensive than a domestic option.

Shopify’s Crackdown

While some CBD sellers in the past managed to sign up for payment processing through Shopify, the company has confirmed that products containing CBD cannot be sold through Shopify Payments. It suggests finding a third-party gateway isntead.

Shopify may actively shut down merchant accounts for businesses selling products that contain cannabidiols. Note that you can still use Shopify to host your ecommerce store, you just can’t use Shopify Payments to accept credit cards through that store.

Elavon Stops Accepting CBD

In early 2019, backend processor Elavon announced that it will no longer support merchant accounts for businesses selling CBD. Elavon (and its resellers) was a pioneer in CBD merchant accounts, and many businesses were caught offguard by the news.

Unfortunately, processing companies operating on Elavon’s platform will not be able to continue processing payments for CBD businesses. If that’s you, you’ll need to secure an alternate solution. Fortunately, there are still processing companies that can offer merchant accounts to CBD sellers.

If Elavon changes its policies on CBD merchant accounts, we’ll update this section.

Finding a Processor

When looking for a credit card processor for CBD products, start with “high risk” companies. You can use comparison services to see pricing from different high risk processors.

Check out CardFellow’s free tools for locating high risk merchant accounts. You’ll be able to request pricing and talk with processors about supporting your CBD business. Try it now!