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Published: April 30, 2021

Everything You Need To Know About Federal Regulations And High-Risk Merchant Services For CBD Payment Processing

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Cannabidiols (CBD) have become so popular in the world of health and wellness. Since its introduction to the market, many online businesses have joined the league of CBD vendors. In 2025, the venture is estimated to rake a whopping $16 billion. It’s a fruitful business, and it’s no surprise that everyone is pitching in.

 Establishing a CBD business is nothing short of the normal steps involved in any business. However, cashing in without violating rules and regulations could be tricky. Since the risk associated with payment processing in the CBD Industry presents a dynamic set of challenges, CBD entrepreneurs are constantly looking for solutions. If you are one of the people seeking real answers to payment processing in the CBD industry, you’re in the right place. 

 This blog discusses all you should know about CBD federal regulations and how to avoid being a defaulter. We will also talk about possible CBD payment processing services that give your business free from money issues.


What is CBD?

Dr. Roger Adams and a group of scientists made a pioneering discovery in 1940. They identified cannabidiol as the non-psychoactive ingredient of Cannabinoid. After 80 years of this groundbreaking discovery, CBD remains an intriguing element in science. As a result, it continues to be an area of research interest amongst top scientists worldwide.

Naturally, CBD is a component of marijuana and hemp plants like THC. However, CBD had been in the limelight 20 years before THC was discovered. Recently, scientists have uncovered several health benefits of CBD, which is an important reason for its popularity. CBD can be assimilated into the body via several means, including inhalation of CBD vapor or smoke and oral administration.

Presently, the world is paying close attention to CBD because many users are enjoying the benefits. Despite this feat, the Food and Drug Administration (FDA) has concerns about unproven health claims in such products. 

The Federal Trade Commission (FTC), alongside the FDA, has limited the use of high-risk CBD payment processing. They believe that claims and promises from a product could prevent users from seeking adequate medical care.


What are health claims?

Unsubstantiated health claims are claims that the FDA has not verified. Any information claiming that a product could impact health is a health claim, especially when it is considered a positive claim.

Here’s the challenge for CBD sellers. If your product falls in the unverifiable health claims category, it will be tagged “pseudo-pharmaceuticals.” These products are not approved prescription drugs or products, but they still claim to have the same benefits as prescription drugs.


Is CBD Legal? 

In the United States of America, 33 states, including the District of Columbia, legalized the use of cannabis in certain forms. However, you can only sell hemp-derived CBD products online. 

Of course, some states still prohibit the sales and consumption of CBD altogether. Others allow sales in limited amounts or the use of a special license. Despite the legalization of cannabis in these states, the cannabis or hemp plant is still a Schedule 1 Narcotic under standard protocols.


Federal Regulations And CBD 

According to US regulations, the manufacture, importation, distribution, and possession of certain substances must be CSA (Controlled Substance Act) regulated. Therefore, the FDA is in charge of the addition and removal of substances from CSA schedules.

The CSA has five standard schedules for various substances. Schedule I is the most restrictive, while Schedule V remains the least restrictive. According to Schedule I, substances in this category:  

  • Possess a high potential for abuse
  • Possess no current acceptance for medical use
  • Possess no accepted safety for use under medical supervision

Substances in this schedule are LSD, MDMA (Ecstasy), heroin, and puzzlingly marijuana or cannabis. Conversely, Schedule V substances possess a little potential for abuse and have accepted medical use. 

If abused, schedule V substances only show limited dependence. Codeine and similar products fall in this category. CBD-containing epilepsy drugs are in this schedule, according to the Drug Enforcement Administration (DEA).

Following DEA’s classification, CBD is not precisely the same as cannabis. According to them:

“Products and materials made from the Cannabis plant and falls outside CSA’s definition of marijuana (sterilized seeds, oil, cake, etc.) are not controlled by CSA. Therefore, the said products can sell accordingly without CSA restrictions or regulations.” 

CBD is a high-risk product because its parent element: marijuana, remains illegal according to federal laws. That’s the same reason for restrictive payment processing for online CBD products. CBD and THC are marijuana-derived, but cannabis has 0.3% more THC.


CBD Requires High-Risk Payment Processing 

If you encounter payment processing challenges, this section, and the next cover all you need to know about the logistics of high-risk payments. First, we’d talk about why CBD for sale needs high-risk merchant services.


What is a merchant service or a merchant account?

Merchant services are a form of payment processing services that helps your business to receive and accept payments. These are all forms of online payments, credits, debits, and ACH payments. 

While it is typically a third-party service, merchant services make sure transactions are in order. A merchant account is where these payments are received and sent. Hence, making them an integral part of e-commerce businesses.

Since merchant services could be anyone’s game, there are tons of high-profile account providers. These are traditional account providers that are naturally any entrepreneur’s first choice, but they are not tenable for CBD payments.   

These service providers could make it difficult to secure payments because of the risk associated with the business. While entrepreneurs have to be approved through traditional processes, accounts could still be revoked. Hence, leaving businesses in the open, prone to losses, and costing them customer loyalty.


The high-risk payment processing approach

High-risk merchant services cater specifically to businesses that cannot successfully process their payment through traditional merchant accounts. Like the traditional merchant accounts, high-risk processing accounts enable credit and debit card payment. What makes the difference is that they do not offer the same user experience as the traditional accounts.


What to look for in high-risk merchant services 

When looking for payment processors for CBD products, you want to start with high-risk companies. However, you can expect a variation in their rules, fees, services, and conditions when compared to the regular merchant accounts.

Again, it would be best if you were sure that they have taken on high-risk payments so that you don’t fall into the wrong hands. To determine which high-risk merchant service providers to work with, look at the following:

  • High-risk availability

As we have mentioned, your processor must have a track record of high-risk transactions. The reason is that many CBD sellers have fallen victim to fraud. CBD processing services can be offered by only those who are ready to take the risk. You are looking for a processor that has extensive experience within the high-risk sector. Consider them if they have gateway systems in:

  • Travel services
  • Bitcoin trading
  • Online dating
  • Pharmaceuticals
  • Online gaming
  • Telemarketing
  • Adult products and services
  • Vaporizers and e-cigarette products


  • Convenient integrations

Anyone switching between platforms will automatically think of it as stressful and time-consuming. Therefore, the most convenient integrations are the next choice. That said, it will be best if you considered staying away from processors that insist that you use their existing platform.


The truth is that options abound, so sticking with one that forces you to do things their way may not be ideal for your business in the long run. Instead, consider processors that allow you to work with their CBD credit processing system, especially with e-commerce software.

Companies with these services tend to be more open and transparent in their dealings. The API integration system is a common gateway that high-risk processors use; you may watch out for it. The API system can be monitored by the CBD seller or entrepreneur so that you can measure growth.


  • POS integrations

POS helps you to track online and offline transactions by providing an accurate report. That way, you offer customers ease of access, increase loyalty, and build business intelligence with one tool.


  • Fees

Popular high-risk processors are in the business of charging hefty. It could be one-off or subsequent charges. The better way to approach this is by weighing the options. Consider how the payment affects your business and check if it works for your profit margin. If not, choose another provider. You will surely find affordable rates.


  • Contracts

The contract is an official binding agreement between two parties, so you must have enough time to consider before putting ink to pain. The best payment processor allows you ample time and will always gun for a long-term engagement. You should go for processing companies with a long-standing in the business with testimonials to support their claims.


  • Customer support

Before settling for a processor, ask their customer support team how they handle disputes. It will give you insight into what to expect. Personalized customer support supersedes all other options any day.


Final Thoughts 

Now you know that processing payments are a less daunting process with high-risk processing systems. Furthermore, you don’t have to settle for a system that doesn’t fit your needs. Beware of signing up so fast. You have options. All you need to do is explore.

AGAPAY - Transactions that give

Agapay was founded on the idea that payment processing should be ethical and give back to the community. In pricing, structure and service, we will always do our best to give the most value and maximize service.
Agapay is a Registered Partner/ISO of Elavon, Inc. Georgia [a wholly owned subsidiary of U.S. Bancorp, Minneapolis, MN]
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