Thursday, May 30, 2019
CBD has gained notoriety in recent years for its health benefits, such as relief from pain, anxiety, and the effects of epilepsy and post-traumatic stress disorder. It can be used in numerous forms, including in vape pens, as tinctures or topicals, or it can be added to foods like candies and drinks. Various estimates suggest CBD products represented a $500 million market in 2018, and the market is on track to grow to reach $22 billion by 2022.
While CBD can be derived from the same plant as marijuana, it doesn’t get users “high” the way marijuana does. CBD also can be derived from the hemp plant, a cousin of marijuana that has little to no psycho-active ingredients and is commonly used in industrial applications.
Federal law for decades treated hemp the same as marijuana: prohibited under the Controlled Substances Act. But that changed with passage of the 2018 Farm Bill, which reclassified hemp as a commodity, on par with corn and soybeans.
Now CBD products, particularly those derived from hemp, are attracting attention from major retailers. Earlier this year Curaleaf Holdings Inc., a manufacturer of CBD products, said it had inked an agreement to stock CBD products in 800 CVS stores. Soon after, Walgreens stated it would be stocking CBD creams, patches and sprays in 1,500 stores across nine states.
Most payment services companies, however, have stayed clear of serving businesses they know sell CBD products, asserting that it violates credit card network rules, which ban payments for items prohibited under federal law. Leading acquirer Elavon earlier this year began accepting applications to board CBD merchants only to terminate those merchant accounts a few months later.
Square this week confirmed for several news outlets that it is “conducting an invite-only beta for some CBD merchants.” Visa holds a 9.99 percent stake in Square, according to federal government filings.
News of Square’s entry into the CBD space comes as legislation gains momentum in Congress to open the banking system to businesses selling cannabis and related products. In March, the House Financial Services Committee approved a bill providing federal protections for banks that serve state-authorized cannabis businesses. The bill, the Secure and Fair Enforcement (SAFE) Banking Act, has over 150 co-sponsors and is expected to be passed by the full House. A companion measure in the Senate has 29 co-sponsors, but has not yet been scheduled for a hearing or vote in that chamber.
In April, banking regulators from 25 states and territories sent a letter to leaders of the U.S. House and Senate urging lawmakers “to resolve the conflict between state cannabis programs and federal statutes that effectively create unnecessary risk for banks seeking to operate in this space.”
Lawmakers in at least one state, California, aren’t waiting for Congress to settle the issue. California is one of 30 states, plus the District of Columbia, that have legalized cannabis products (including CBD) for medicinal and/or recreational uses.
The California Senate this week approved by an overwhelming majority (35 to one) legislation that would allow banks and credit unions in the state to apply for limited-purpose state charters in order to accept deposits from businesses selling cannabis products.
The move follows a report issued last year by a state panel urging creation of state-chartered banks to work with cannabis business. Absent legitimate banking relationships, the report noted, these business are awash with cash. And it added, “large amounts of cash make cannabis businesses, their employees and their customers targets to violent crime.”
“As policymakers, we have a duty to further the will of the voters while protecting the public safety of our constituents,” California Senate Majority Leader Robert Hertzberg, said in introducing the legislation last month. “This measure is by no means the ultimate solution, but it’s one small step in the right direction to get some of this money off the streets and into bank accounts.”
The Hertzberg bill still must be approved by the California Assembly and the governor before becoming law. 
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