CBD merchants were last Thursday given a reprieve from high fees and reliance on check payments after Square Inc. announced it is officially opening up payment processing capabilities to sellers of CBD products.
Unlike THC, which is the psychoactive component of cannabis, not much research had been done about CBD in the past. Consequently, there’s little scientific evidence on its effectiveness and side effects, and due to this, there is scant regulation of CBD. The drawback is that very few payment processing firms have been willing to exploit the steadily increasing market.
The FDA has been working on a set of regulations for the CBD industry, but until they’re implemented, sellers are prohibited from adding CBD to food or drinks and making claims about CBD’s medical benefits.
Speaking at a Manhattan event, Square’s General Counsel Susan Whiteley stated that this was the firm’s opportunity to step in and offer modern processing capabilities to CBD merchants. This was good news for the sellers who had issued complaints about the challenges that came with securing a transparent payment system. They cited high fees from other processors and having to rely on checks for payment.
Last year, the Farm Bill legalized the commercial cultivation of hemp, and most CBD merchants were hoping that CBD would be approved as part of the bill. However, since it is the main ingredient of the only cannabis-based drug approved by the U.S Food and Drug Administration, it wasn’t approved. The drug, Epidiolex, is used to treat severe forms of epilepsy in children.
Square will charge CBD sellers 3.90% plus an extra 10 cents per transaction for in-person tap, swipe, and dip payments. Transacting online will cost you 4.20% plus 30 cents per transaction, and the sellers will have access to extra services such as inventory and payment managing services.
The CBD industry is still a murky, unregulated landscape. There are very few policies on enforcement, and this poses an excellent question; will Square be held liable if their clients don’t comply with the rules and regulations surrounding CBD? According to Whiteley, Square exercises due diligence when dealing with CBD merchants to ensure they comply with federal laws concerning labeling, marketing, and medical claims. All CBD products must be derived from hemp, with a THC content of less than 0.3%.
She adds that generally, compliance with all the laws and rules around marketing is the seller’s duty. The company will exercise due diligence, but ultimately, the sellers are responsible for their own compliance.
Analysts are convinced that the step taken by Square brings a lot of relief to CBD industry players like Canopy Rivers Inc. (TSX: RIV) (OTC: CNPOF) and Youngevity International Inc. (NASDAQ: YGYI) who would like the sellers of their products to have as many payment processing options as possible.
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