It’s used primarily for therapeutic purposes, including offering pain relief, lifting one’s mood, and improving sleep. No one is getting high with CBD.
So why does PayPal take such a hard line on CBD oil?
As a CBD merchant, you know the reluctance most banks and payment processors have when approving merchant accounts.
Unfortunately, cannabis and CBD merchants are also on the list of PayPal prohibited businesses. That’s where Easy Pay Direct comes in. We offer merchant accounts for CBD merchants.
Other companies exclude CBD merchants, too. The same holds true for virtually all major payment sites.
PayPal and Cannabis
PayPal has never offered payment processing for high-risk merchants.
Since its inception, the platform has always been sensitive to chargeback volumes. Certain high-risk merchants experience more chargebacks than low-risk businesses. Much depends on the industry and marketing model.
Dispensaries that accept PayPal have had their ability to do so removed.
The shutdown is abrupt and immediate once PayPal determines CBD is being sold.
No payment processor means no way to conduct business.
PayPal, CBD, and Regulations
No one needs to tell CBD merchants that their industry is subject to many constantly changing regulations.
Even though CBD is no longer illegal under federal law, laws regarding CBD depend very much on the state.
As long as CBD oil or other products contain less than 0.3 percent THC, almost all states permit such sales. The issue is that the specific legal requirements are up to individual states.
As for CBD and PayPal, it’s unlikely that anything will change soon.
Cannabis is not yet legal on the federal level, but it is increasingly legal in many states – as well as in Canada.
PayPal is not an entity that exists in a particular state. It’s an international company that must operate under state and federal law.
Until cannabis and CBD are legal everywhere in the U.S., PayPal will not accept such merchants.
The bottom line is that CBD and cannabis sales still exist in a legal gray area.
The FDA is still designing the regulatory framework for CBD, so regulations are still in flux.
Until that changes, CBD oil and PayPal do not mix.
That also puts merchants who sell non-CBD products in a bind.
Maybe herbal and botanical products are part of your company’s wares.
PayPal will not serve your business, period. That’s why you need to seek a service such as Easy Pay Direct.
PayPal Acceptable Use Policy
Under PayPal’s acceptable use policy, it does not currently allow the use of its payment platform for the sale of CBD products.
In fairness, PayPal doesn’t permit the sale of any products or services deemed high-risk.
Why CBD is High Risk
Cannabis and hemp are both derived from the same plant, cannabis sativa.
Hemp simply means that cannabis contains less than 0.3 percent THC by dry weight.
The 2018 Farm Bill changed the status of hemp and hemp-derived products, such as CBD, from a Schedule I controlled substance and removed hemp from the definition of “marijuana,” which remains a Schedule I substance federally.
CBD is now legal in all 50 states, but it’s more legal in some than others. In a few states, CBD is only conditionally legal.
For instance, in North Dakota and Minnesota, only those with a doctor’s prescription and a licensed medical card can purchase any kind of cannabis product, including CBD.
In Michigan and Nebraska, CBD’s legality is still in a transitory position, as the governing bodies determine regulations.
There is also the fact that some states incorporate changes in federally controlled substances by reference, but the majority have their own schedules.
These laws do not change when federal law does.
A CBD business must determine whether a state permits hemp cultivation but doesn’t allow the sale of products made from hemp, or whether it only allows non-ingestible products.
As noted, some states allow CBD only for medicinal purposes. Some states restrict the shipment of out-of-state hemp products.
Registration and licensing of manufacturers, distributors, and retailers is necessary.
What about those states in which cannabis use is legal?
Businesses operating in those states must determine whether the regulations applying to cannabis also apply to hemp and CBD.
If CBD oil is scarce in brick-and-mortar stores in some places, there are no such limitations when ordering online.
It’s the payment processing for merchants that stands in the way.
While CBD retailers are dealing with payment processor issues, sales are booming.
Total CBD sales in the U.S. in 2020 reached nearly $1 billion, and that number is expected to rise to $1.8 billion in 2022.
The demand is there and growing, but payment issues may keep sales from reaching their full potential.
While it is illegal to label CBD as a dietary supplement or add it to a food, the FDA has approved a CBD product, Epidiolex, to treat seizures.
PayPal remains the best-known of online payments systems, but it has many rivals.
For now, its competitors are taking the same approach to CBD merchants.
Shopify CBD Policy
Shopify notes that CBD laws in the U.S. are in constant flux, and advises merchants to get legal advice before selling these products on its platform.
Shopify allows CBD merchants to set up only email-order only and shipping notifications. It does not permit SMS notifications for CBD purveyors.
CBD merchants must select and apply for a third-party payment gateway, such as Easy Pay Direct.
Shopify Payments does not process CBD or hemp payments currently. It does partner with third-party payment gateways for the sale of CBD and hemp products, but approval requirements vary by the gateway.
Shopify’s policy statement notes that third-party payment gateways vet CBD merchants heavily.
Shopify may approve merchant accounts depending on:
- Type of product
- How recently the business was established
- Transaction history
Although Shopify partners with third-party gateways, it cannot guarantee CBD merchant approval.
Stripe CBD Policy
Stripe includes CBD on its list of restricted businesses.
It will not process payments for any CBD merchants. That includes those selling only topical items containing CBD.
It also will not process services involving any CBD components, such as massages with CBD oils.
Stripe recommends a third-party payment processor “which works with businesses with a higher level of risk than we’re able to support.”
How to Find a Processor That Accepts CBD Payments
What’s a CBD retailer to do? What payment processor options do you have?
CBD payment processors can provide gateways capable of excluding customers who live in states where CBD is illegal.
What if your company is a start-up? When there’s little business history, a difficult situation becomes even harder.
Even though some CBD payment processors might accept an established business, a startup is another story.
That’s where Easy Pay Direct comes in.
If the entrepreneurs founding the start-up have a previous record of success, and if the company has sound financial backing, we can process credit cards for your business.
Let Easy Pay Direct Help
As a high-risk merchant, you have special payment processing needs.
Unlike low-risk businesses, you can’t assume traditional payment platforms will fulfill those needs.
Easy Pay Direct provides payment processing options for high-risk businesses like yours.
Because we are high-risk business specialists, we have established banking connections that accept high-risk clients.
At Easy Pay Direct, we can set up a CBD merchant account for your business via our EPD Gateway.
We accept merchants selling topical and ingestible CBD products.
There’s no monthly volume minimum and no early termination fee.
In most cases, account approvals take between 7 and 14 business days.
For more information, please contact us at 800.805.4949 or get started here.