The process is simple. Dispensaries intentionally miscode marijuana purchases as ATM withdrawals and then using a cashless ATM—that often looks identical to a card reader—take the funds from the customer’s account hassle-free. As an added precaution, many dispensaries also round-up to the nearest $10 or $20 increment, so the payment will look more identical to a cash disbursement, and then give the customer the difference in cash.

What’s the big deal? 

For many cannabis-related companies and businesses in the U.S., it is a struggle to find a bank that will do business with them because of the variable legal status of marijuana.

Federally speaking, marijuana is still illegal and many banks are incredibly cautious of violating federal anti-money laundering laws by dealing with the proceeds of federally illegal marijuana businesses. As a result, none of the major banks in the United States accept cannabis dispensaries or marijuana-related businesses as clients. 

While the District of Columbia and 33 states have legalized medical marijuana, and 11 states have legalized recreational marijuana, it maintains its designation as a Schedule I substance, grouped with drugs like heroin and LSD. 

How does banking access affect cannabis?

Even with cashless ATMs gaining momentum, most dispensaries across the country still conduct the majority of their transactions in cash due to the federal ban on marijuana spoiling their ability to bank more traditionally. Having extremely limited access to banking services means having large stores of paper currency and higher vulnerability to crime.

In 2022, cannabis retail stores have seen a spike in armed robberies, according to the Craft Cannabis Coalition. In Washington in particular, the crime sprees targeting marijuana retailers have turned deadly with one employee in Tacoma being fatally shot in the neck earlier this month during a botched robbery. This was at minimum the fourth fatality related to a cannabis shop robbery in Washington in the last three weeks.  

Will this method go up in smoke?

In December of last year, Visa released a memo warning against the misuse of ATM transactions, and did not call out cannabis businesses specifically. It did say that cashless ATMs are primarily used by businesses that “are unable to obtain payment services,” based on current laws and prohibitions.

“Visa is aware of a scheme where POS devices marketed as ‘Cashless ATMs’ are being deployed at merchant outlets and are operating in violation of the Visa Core Rules and Visa Product and Service Rules and Plus Core Rules and Plus Product and Service Rules,” the company’s statement read. 

Fraudulent use of cashless ATMs “will be subject to non-compliance assessments and/or penalties” or “subject to further compliance enforcement,” Visa said, but the statement didn’t reveal further details.

While the point-of-sale devices that many cannabis dispensaries use violates Visa’s terms of service, cashless ATMs are still being used across the country. The ramification for cannabis businesses could be dramatic if cashless ATMs are in fact the next target of federal enforcement. Consequences could escalate to federal criminal prosecution for THC licensees who use this illegal system. 

There could be hope

As of today, banks providing financial services to legitimate cannabis businesses under state laws are subject to criminal prosecution under several federal statutes such as “aiding and abetting” a federal crime and money laundering.

However in February 2022, the House of Representatives passed the SAFE Banking Act of 2021 as an amendment to the America COMPETES Act.

Under the SAFE Banking Act of 2021, banks would not be penalized for doing business with licensed marijuana dispensaries and companies.

However, the SAFE Banking Act has a long way to go before it becomes law, needing the approval of both Congress and President Joe Biden to go into full effect.