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The House recently tried to pass a bill that would protect legal cannabis companies that wish to use the services of traditional banks. Unfortunately, the bill failed in the Senate, leaving marijuana and cannabis companies scrambling to find new workarounds to sell their product without facing the wrath of big banks.
Three common workarounds include using cashless ATMs, miscoding transactions, and making cannabis-based products “free.” Unfortunately, these workarounds are often dangerous, illegal, and unsustainable. CERES offers a much better alternative, allowing cannabis companies and customers to execute transactions in a manner compliant with current federal and state laws. No workarounds are needed for CERES - as we have worked with the SEC for more than three years to be transparent, compliant, and SEC-qualified.
Recently, Visa sent out a memo to its customers warning about compliance issues. While they did not specifically mention marijuana distributors in the notice, this language and warning apply heavily to cannabis-based companies. The memo specifically warned against using “cashless ATMs” and miscoding transactions. They threatened penalties and other potential repercussions for anyone found to be engaging with fraudulent third-party vendors using these practices.
What are cashless ATMs? Since federal banks do not allow cannabis companies to use their services, the marijuana industry relies entirely on cash. They are unable to access bank accounts for payroll, taxes, or expenses, and they cannot use debit or credit cards at the point of sale. Most cannabis companies ask their customers to use nearby ATMs to deal with this inconvenience. But when this is not an option, some companies have resorted to “cashless ATMs” or reverse ATMs - devices that record an ATM transaction when no cash is disbursed. As an example, a customer could purchase cannabis for $15. The transaction would round up to $20, and the vendor would give the customer their product and $5 in change. On paper, it looks like the customer received $20 from an ATM.
In areas where cannabis is decriminalized - so possession is legal, but sales and distribution are illegal - cannabis companies will often miscode purchases or sell other items in the place of cannabis. For example, a seller might offer roses for $30. The actual item purchased is a flower, and the cannabis is “free.” At best, these practices are murky. At worst, they are illegal and leave the distributor and the customer at risk of legal action.
The primary issue facing cannabis companies is the need for a simple, effective payment processor that lets them track their sales and protects them from potential litigation. CERES Tokens are SEC-qualified so that customers can shop with confidence. And since our patented payment process records all transactions, cannabis distributors and vendors will have a clear record of every sale. Finally, CERES can cover all the compliance requirements, making this an ideal solution for regulators.
CERES and the use of its stablecoins will transform the cannabis industry regarding banking and regulation. The CERES technology framework is suitable for the current cannabis laws and can adapt to future legal changes within the marijuana industry.