GAO: Visa and Mastercard Still Block Dispensary Sales as Schedule III Nears

Congress's watchdog has put a number on the dispensary checkout problem. In all 8 cannabis-business focus groups convened by the Government Accountability Office, participants said they had trouble accepting the payment methods they preferred, credit cards above all.^[1] The finding lands as the DEA weighs moving cannabis to Schedule III.

The report, "Banking Services: Cannabis Businesses Face Access Challenges," is dated August 7 and was released September 8. It runs 44 pages and was requested by Sens. Elizabeth Warren, Raphael Warnock, Tina Smith and John Fetterman.^[9] It offers no recommendations.

"Obtaining and maintaining financial services remain difficult for CRBs, according to CRB owners and managers," the auditors wrote, using their shorthand for cannabis-related businesses. "Further, accepting customer payments is difficult largely because two major credit card companies prohibit cannabis purchases."^[10]

We covered the banking side of rescheduling earlier this year in our Schedule III banking explainer. This report supplies the federal evidence that story lacked.

Two card companies, one private rule

GAO built its findings on 17 focus groups and 11 interviews. Nine groups drew 74 representatives of banks and credit unions. Eight groups drew 51 cannabis-business owners and managers. The report does not name the two card companies. Secondary reporting identifies them as Visa and Mastercard.

The card networks' rules sit outside the Controlled Substances Act. Acquiring banks, issuing banks, processors and merchants all have to accept the legal, money-laundering and chargeback risk of a transaction. A network can set a stricter line than the statute requires, and both major networks have.

Mastercard's line is legality, not the schedule

Mastercard explained its position in July 2023, when it told financial institutions to shut down cannabis debit-card activity. "The federal government considers cannabis sales illegal, so these purchases are not allowed on our systems," a spokesperson told Reuters.^[3]

"In accordance with our policies, we instructed the financial institutions that offer payment services to cannabis merchants and connects them to Mastercard to terminate the activity," the spokesperson said.

That wording turns on federal legality. Schedule III substances remain controlled and move through federally authorized manufacturing, prescribing and dispensing channels. A state-licensed dispensary does not become a federally authorized pharmacy when the schedule changes.

Visa drew its own line in December 2021 over so-called cashless ATMs. The network said the terminals "mimic standalone ATMs" but are "used for purchase transactions, which are miscoded as ATM cash disbursements," and it treated the practice as a rules violation.

As of September 10, no official Visa or Mastercard notice indicated a broad change in U.S. dispensary acceptance. The GAO passages we reviewed do not record either company promising to hold that position after rescheduling. What they record is the prohibition itself.

What the register looks like

For a shopper buying a vaporizer or a cartridge at a licensed store, the options have not moved. Cash remains the default, often after a stop at an on-site ATM. Point-of-banking terminals round the sale up to an ATM-sized amount, run it as a withdrawal and, at some stores, hand back the difference in cash or store credit. That is the practice Visa flagged.

PIN-debit alternatives depend on the processor, the sponsor bank and the network. They can vanish when a financial partner pulls out. ACH, or pay-by-bank, moves money between accounts without touching Visa or Mastercard, and it suits preorders and delivery better than a walk-in sale because settlement and returns take longer.

Closed-loop wallets ask the customer to open an account and fund it from a linked bank. That adds enrollment friction and ties the shopper to one provider. A normal credit-card checkout, especially online, remains generally unavailable for plant-touching cannabis.

Banked, but at a price

The report separates having a bank account from having affordable banking. Of 48 participants who answered GAO's poll, 43 said their business had a bank account. The problem is the terms.

Participants in 7 of 8 business groups reported monthly or annual fees. Two participants said they paid $100,000 or more per year to keep an account.

Participants in all 8 groups described loans with high fees or interest, and 7 groups cited rates above 15%. GAO compared that with median rates of 7.42% to 7.91% for comparable small-business loans in a Federal Reserve Bank of Kansas City survey for the first quarter of 2025.

Payroll is fragile too. Participants in 7 of 8 groups said a payroll provider had suspended or ended service for at least one cannabis business. Participants in 3 groups described falling back to manual payroll, including cash.

No bank punished solely for serving cannabis, GAO found

GAO looked for cases of banks being punished for serving the industry and found none. "We found no indication that financial institutions have been subject to civil or criminal penalties solely for providing services to CRBs," the report said.^[2] Regulators told GAO they had taken no enforcement action solely for that reason.

Roughly 1,000 banks and credit unions, about 11% of some 9,000 federally insured institutions, filed cannabis-related suspicious-activity reports in 2024. FinCEN data cited in an SEC filing put the December 2024 count at 998 institutions: 816 banks and 182 credit unions.^[4] GAO cautioned that a filing can reflect a one-off transaction or an ancillary vendor, not an ongoing dispensary account.

The deterrent, in GAO's account, is cost and uncertainty rather than prosecution. Institutions still face the FinCEN 2014 guidance, which requires enhanced due diligence and cannabis-specific suspicious-activity reports.^[8]

Of 25 participants from institutions not serving cannabis, 20 said a federal safe harbor would likely change which cannabis businesses they would serve. Some said legalization or lighter Bank Secrecy Act burdens would still be needed.

Alicia Trapp of Black Hills Federal Credit Union, which banks cannabis clients, described the operational view in a sponsored industry report. "At this time, the rescheduling has not changed any banking practices in how we monitor our cannabis members," she said.

A vaporizer is not always a cannabis sale

The card rules attach to the transaction, not the object. A standalone vape such as the Mighty+, bought from a conventional hardware retailer, is not necessarily a cannabis purchase. Mastercard has said lawful vaping and ENDS purchases may continue on its network, subject to U.S. authorization and state law. The same vaporizer rung up at a dispensary counter is a different transaction.

Once the merchant is a dispensary, or the online basket includes THC oil or a cartridge, the acquiring bank is likely to underwrite the whole sale as cannabis. The hardware price on a dispensary menu can match a vape shop's while the checkout options do not.

The menu price is not the checkout price

Payment friction shows up in what a shopper actually pays. An online dispensary menu may list a vaporizer at the same nominal price as an in-store menu, but the final cost can carry ATM or convenience fees, point-of-banking rounding, delivery minimums, wallet fees and lost card rewards. The merchant's higher banking, security and cash-handling costs sit inside the sticker price as well.

That makes all-in checkout cost, not the displayed menu price, the more useful basis for comparing dispensaries. Without ordinary card-not-present acceptance, a cannabis marketplace cannot offer mainstream one-click checkout. Smaller operators cannot spread specialized payment costs over high volume. Both effects can widen price gaps between stores.

Cash may shrink the basket

Independent research points to one more effect. A mega-replication published August 14 in the Journal of Consumer Research by Christopher J. Bechler of Notre Dame, Rhia Catapano of the University of Toronto, Szu-chi Huang of Stanford and Oleg Urminsky of the University of Chicago tested 32,371 participants across 65 products and 57 price points from $1.09 to $400.^[7]

"Leveraging a broad set of established paradigms, we replicate the finding that paying with cash is more psychologically painful than paying with card, even among today's consumers who own multiple cards, digital wallets, and virtual currencies," the authors wrote.

Pooled across all studies, participants spent a mean of $38.17 with cash versus $41.76 with cards. In the theory-testing studies, the gap was $49.58 versus $54.50. The study tested no cannabis product, so it supports only a hypothesis that cash-heavy dispensaries see smaller baskets and fewer impulse additions.

The flip side is a public-health argument: friction at the register could restrain impulse buying. Cash-heavy commerce carries its own security, transparency and consumer-fee costs, so the tradeoff is not one-sided.

The next decision belongs to DEA, not the card networks

The rescheduling case has reached the post-hearing stage. DEA held an 11-day hearing from June 29 through July 15 before Chief Administrative Law Judge Derek C. Julius.^[5] Post-hearing briefs were due August 17, and government attorneys used theirs to argue that "Marijuana can no longer remain in Schedule I."^[6] Julius ordered corrections to the roughly 2,500-page transcript in late August and is preparing a recommendation.

That recommendation is advisory. DEA Administrator Terry Cole can accept, reject or modify it, and any final rule is likely to face court review. Even a final Schedule III order would leave the 2014 FinCEN guidance in place until Treasury revises it, and would not compel either private card network to write new acquiring rules.

GAO, for its part, pointed lawmakers somewhere other than the schedule. "A safe harbor law could have greater effect if it reduces the compliance costs of serving CRBs," the auditors wrote, in a report that left the choice of remedy to Congress.

That leaves the question the report opened with unresolved. The schedule may change, the card networks have said nothing new, and a shopper walking into a licensed dispensary still pays in cash, at an ATM or through a workaround.