These are your payment options for buying legal weed in New York

NEW YORK — Although weed is now legal in 37 U.S. states — including New York — the District of Columbia, Guam and Puerto Rico, it’s still illegal at the federal level. And the financial industry has yet to embrace the legal market, making it somewhat difficult to use anything but cash on purchases at recreational marijuana shops.

Because weed remains illegal at the federal level, most banks in the country simply won’t service cannabis companies.

Several years ago, the American Bankers Association put out a statement, which has been updated a few times since, that says “the possession, distribution or sale of marijuana remains illegal under federal law, which means any contact with money that can be traced back to state marijuana operations could be considered money laundering and expose a bank to significant legal, operational and regulatory risk.”

John Kagia, director of policy for the New York State Office of Cannabis Management (OCM), said because of this, many large credit card companies, like American Express, Mastercard and Visa, have said they will not allow weed-related transactions.

“Visa and MasterCard have been unequivocal since the advent of this market that they were not comfortable with providing credit card payments for cannabis,” he said, noting in the first six months of 2023, New York had $33 million worth of legal weed sales.

“The new development here was MasterCard and Visa coming out and saying that they also did not want their debit cards being used to issue payments,” Kagia added.

WHY LARGE BANKS WON’T LET YOU CHARGE WEED

Large banks are saying that “until there are very clear guidelines from the federal government on how banking specifically is going to be managed, the industry is disinclined to participate, said Kagia.

“Bankers have been looking for clarity on guidance, which would ideally be a law that will guarantee their protections will be preserved even with a change of administration. …There’s been a bill called the Safe Banking Act that’s been in circulation now for years,” he added, noting Sen. Charles Schumer is a big proponent of the bill.

So as weed shops open across the state — and at least two on Staten Island are close to either opening up a brick and mortar location or delivery service — many people are wondering about their payment options at a marijuana dispensary.

REGIONAL BANKS

But if you do your banking with a local or regional bank, you may be able to use your debit card to purchase weed.

“There are a lot of smaller banks that have seen the opportunity [to allow weed purchases on their debit cards]. And because they’re state-chartered banks they don’t do a lot of business across state lines,” said Kagia.

“These banks are not as exposed to the same kind of federal regulatory infrastructure. These smaller banks, some of them are credit unions, some of them are community banks, and in some cases, even some larger banks, serving very specific types of cannabis clients, have found the opportunity presented by the cannabis industry significant enough for them to justify offering at least some services to the industry,” he added.

SO HOW CAN YOU PAY?

In addition to cash and debit cards issued by some local and regional banks (you’d have to check with your individual bank to learn if they allow the transactions) there are other options, such as setting up an Automated Clearing House (ACH) account with a weed shop to pay for purchases.

“One of our licensees allows you to set up a an ACH [a computer-based electronic network for processing transactions] from your bank for payments,” Kagia said. “So it takes a little bit of time to get it set up the first-time, but once you’ve got it set up then you’re set because you’re not using an intermediary merchant.”

However, Kagia says it’s too early to say that most New York dispensaries will only take cash or debit cards issued by local banks for the long-haul.

If the Safe Banking Act becomes law there will be an array of payment options, he said. Until then, many dispensaries are offering ATM services either in the shop or at least pointing consumers to the nearest cash machine.

“While we recognize that these issues can occasionally make purchasing cannabis legally a less elegant consumer experience than it might be for the rest of the economy…these are just some of the growing pains that occur in a young, fast evolving market. Even as we go through this evolutionary process I would still encourage consumers to purchase from the legal market where they can get quality, safe tested product.”

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