With 14 states and the District of Columbia on record with laws that permit the sale of medical marijuana, and another eight states awaiting the outcome of proposed legislation or ballot measures that would legalize medical marijuana, the movement toward decriminalization of medical marijuana appears to be gaining momentum.
However, under federal jurisdiction, marijuana use in any context remains against the law. While the federal government cannot force states to enact laws identical to federal laws, or require states to enforce federal laws, the U.S. Department of Justice has the authority to prosecute individuals and organizations that violate federal laws.
Despite discrepancies between federal and state laws, a handful of payment processors are approaching medical marijuana dispensaries. Total Merchant Services Inc. offers free equipment upon signing of medical marijuana dispensary accounts in states where it is legal.
Direct Bancard Inc. recently introduced a POS system for medical marijuana dispensaries that tracks patients, inventory and sales. Until now it was "a straight cash business," said Martin Khemmoro, Executive Vice President of Direct Bancard. "We've installed many POS systems in the last few months in Colorado, California and Michigan. This thing is so new that nobody has come out with a good POS solution that makes it a turnkey operation. I think we've done that."
Merchant payments solutions provider, Commerce Online Inc., offers branded, prepaid loyalty and ID cards to dispensaries through its Collect Card Services division. The cards can be loaded to any denomination with direct deposits made to banks via the Internet or dispensary POS systems.
Under the Controlled Substances Act of 1970, cannabis is classified as a Schedule I drug, which by definition is a drug with "no accepted medical value in treatment," and it falls under the classification of "new drug," which requires an Investigational New Drug Application and subsequent authorization from the Food and Drug Administration before it can be administered to humans.
In May 2010, following several attempts to pass legislation that would remove federal penalties for medical marijuana, 15 members of Congress, led by Rep. Barney Frank, D-Mass., issued a letter written by Rep. Jared Polis, D-Colo., to Treasury Secretary Timothy Geithner stating, "Legitimate state-legal businesses are being denied access to banking services, which does not serve the public interest."
The letter also requested "formal written guidance" to assure banks would not be federally targeted for conducting business with medical marijuana dispensaries.
"They were trying to insure that medical marijuana dispensaries could have banking services provided to them, because there is so much capital involved," said Mike Meno, Director of Communications for the Marijuana Policy Project.
"A lot of banks that have to comply with federal law are hesitant to take medical marijuana business. I haven't heard any updates about where it stands, but the states with medical marijuana constituencies have an obvious interest in this."
While, as of this writing, expansion of medical marijuana dispensaries into more states hinges upon ballot approval in the November elections, existing state-legal dispensaries are opening channels with processors and banks willing to set up merchant accounts. According to the Marijuana Policy Project, an estimated 586,208 patients qualify for medical marijuana in the 15 states where it's currently legal.
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