In 2018, CBD products raked in $2 billion and the market is estimated to grow to $16 billion in retail sales by 2025, according to a report by Cowen & Co. So why wouldn’t merchant service providers want to take a hit of such a growing and lucrative market? According to Hoban Law Group financial services group chair and senior attorney Steve Schain, the issue with payment processors and CBD really boils down to a complicated series of laws and guidelines.

Here’s how it works. CBD and THC are two of nearly 120 cannabinoids, active chemicals contained in cannabis plants that many have found to be helpful for a variety of health conditions and other uses. From a legal standpoint, hemp is derived from cannabis plants with less than 0.3% tetrahydrocannabinol (THC), the type of cannabinoid that gets you “high.” Anything made from cannabis plants with more than 0.3% THC is completely illegal at the federal level.

Thanks to the passage of the U.S. Farm Bill in 2018, hemp products are now legal in the U.S., but it’s not so straight forward because according to Schain, regulators have no idea what to do with CBD. What we refer to as “CBD products” can be completely hemp-based (and therefore legal) or a blend of CBD and THC that exceeds the THC percentage allowed and is therefore only legal medically or recreationally on a state-by-state basis.

Schain described what he called “a fantastically overburdened amount of regulation” that leads to CBD payment processing issues. In short, this includes the Controlled Substance Act, Bank Secrecy Act, an internal memorandum from the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) followed by a trio of memos called the Cole Memorandum. The U.S. Food and Drug Administration (FDA) also prohibits adding cannabis to food or making health and wellness claims.

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