On April 19, 2022, the Washington State Liquor and Cannabis Board (WSLCB) and the Washington State Department of Financial Institutions (DFI) issued a joint press release regarding “Cashless Retail Transactions.” In this memo, WSLCB and DFI address the recent rash of deadly cannabis retail store robberies in Washington. Because Washington cannabis businesses do not have access to many traditional financial institutions, they are largely cash-based businesses, making them particularly susceptible to robberies which often end in tragedy. This was the case with Jordan Brown, a budtender who tragically lost his life in a recent robbery.
Cash Reliant Business
When a cannabis retailer cannot accept credit or debit cards, they must hold relatively large amounts of cash on their premises, compared to similar non-cannabis retail stores. This predicament is a result of federal law. Marijuana remains illegal under federal law, and although banks and credit unions can take steps to work with cannabis businesses, many choose not to unless and until marijuana is legalized federally. Major credit card networks, such as Visa and Mastercard, prohibit using their cards for the purchase of an illicit drug, even if the sale is legal under state law.
The WSLCB attempts to address the cash-only issue by drawing attention to WAC 314-55-117. This WSLCB rule allows retailers to use payment services for cannabis sales if the following conditions are met:
(1) The payment service provider must:
- (a) If applicable, be licensed and in good standing with the DFI; and
- (b) Not have any interest, as a true party of interest or financier, in a marijuana licensee.
(2) The payment service provider may charge a convenience fee to customers provided that the customer has the option of canceling the transaction when informed of the convenience fee.
(3) The retail purchase price must be calculated in U.S. dollars.
(4) The marijuana excise tax required under RCW 69.50.535 must be collected from the customer based on the U.S. dollar purchase price.
In the memo, the WSLCB summarizes the above rule as follows: “Essentially, the rule allows retailers to engage in business with third-party vendors to allow for cashless transactions with customers. Transactions may be conducted through an app on the customer’s phone.”
Cash Free Options
DFI has also stepped in to assist Washington cannabis retailers in minimizing cash-only transactions by posting a list of “depository (banks and credit unions) and ‘non-depository institutions’ that provide these services.” The non-depository institutions appear to refer to businesses that are not traditional banks or credit agencies, such as point-of-sale services. Currently, the list includes PayQwick, POSaBIT, Aeropay, and CanPay.
I’ve been working in this industry since 2015. Over that time, I have seen, both as an attorney and a customer, a number of attempts to work around cashless transactions. Some payment options have included transactions involving cryptocurrency. I have also seen payments via cashless ATMs, where a customer inserts their debit card at the point of sale to authorize a direct payment to the retailer. I have also heard of cannabis retailers working with payment processors who attempt to hide the nature of the transaction in order to allow credit cards to be used at the point of sale.
These alternative services can be both costly, due to high fees charged by the service providers, and temporary, as companies like MasterCard and Visa always seem to eventually figure out when their cards are used in a cannabis shop. All this is to say that none of these methods has seemed to really take hold, at least here in Washington. Hopefully, this statement from the WSLCB will change that and make more retailers feel comfortable with cashless transactions.
Need for Federal Change
However, state agencies like the WSLCB and DFI have only so much power. They cannot force Visa, Mastercard, and American Express to allow the use of their cards at retail stores. Federal lawmakers must make a change in federal law to truly alleviate the dangers cannabis companies face. The impediments that are scaring off potential financial service providers would likely dissipate if Congress removed marijuana from Schedule I of the Controlled Substances Act or passed legislation such as the SAFE Banking Act. In a nutshell, the SAFE Banking Act would remove criminal liability for financial institutions that choose to service cannabis businesses, including crimes like money laundering, aiding and abetting, and conspiracy, to name a few. A prominent Washingtonian appears to be leading the charge to amend federal law, as Senator Patty Murray doubled down on her support for the SAFE Banking Act in a recent press event on 4/20, as reported by Marijuana Moment.