Why Elavon Is Ditching CBD Companies

Elavon, one of the largest CBD merchant processors in the United States, has decided to no longer do CBD processing. Why would Elavon make such a hasty decision? After doing some research, a series of reasons as to why such a mammoth merchant processor is pulling out of the cannabidiol game becomes clear.

The good news? Even though an approximate 13 thousand CBD companies will be affected, this is far from the end of the CBD industry. Instead, it’s the start of a better-regulated industry full of higher-quality competition that truly cares about the products being sold and the ingredients that go into them.

Today, we’re going to look at not only the reason why Elavon is cutting ties with CBD companies but also what that means for the future of the CBD industry and companies within the industry. 

Uncertainty in the Industry’s Future

Many influential industry leaders believe the FDA chairman stepping down in early March of 2019 created uncertainty as to how the FDA and our federal government will be treating CBD in the future. As it stands right now, only FDA-approved CBD drugs like Epidiolex have been recognized as a schedule 5 drug; meanwhile, other hemp-derived CBD products, even protected under the 2018 Farm Bill, are not recognized and instead defined as a cannabis derivative.

Many believe that this change in the FDA set back merchant processing opportunities by at least six months. We try to look on the bright side — every time there’s a new challenge in the CBD world, it just means there’s less competition for the CBD brands that are truly serious about moving forward. 

Association with US Bank

Elavon is associated with US Bank. With the passing of the 2018 Farm Bill came people across the country flooding US Bank branches and wanting to open CBD merchant accounts. An even bigger issue was the people wanting to open merchant accounts for their marijuana businesses. A lot of marijuana companies were going in, saying they were a CBD company, and because of the lack of an approval process, the US Bank accepted them without looking over the products they had for sale.

It became too overwhelming for US Bank branches to accept or deny all the cannabis companies trying to set up merchant processing accounts at each location. Without the knowledge of what makes a reputable CBD brand, the branches were lost on how to sort between all the marijuana companies posing as CBD brands.

Elavon Wasn’t Prepared for the CBD Industry

There was a massive series of chargebacks in the first few weeks of Elavon accepting CBD brands for merchant processing accounts. Elavon came into the industry and wanted to shut everything down within six weeks of beginning, showing little preparedness in knowing how to handle the CBD industry.

Now, thousands of smaller CBD businesses across the country are scrambling to try to find merchant processing. With only a few banks that do accept CBD transactions right now, it’s unlikely many of those smaller CBD businesses will have much success in securing a new processor. These financial institutions are not looking for startups so are seldom interested in assisting with a CBD business that doesn’t generate at least $100 thousand a month or more in processing.

CBD Industry’s Future

Although many CBD companies are being impacted negatively, there is a silver lining in Elavon jumping ship. The CBD companies that want to throw in the towel or can’t handle the rapid changes in the industry will quit. The brands that thrive through this will step up as new industry leaders and keep propelling the market further forward. This is a short-term challenge, and solutions will start to show themselves soon.

Note of Advice

If you’re a CBD brand that hasn’t yet received an email or letter from Elavon about getting shut down, you may be in the clear. If the financial institution didn’t flag you as a CBD company and you can keep making transactions, then you are under the radar until it’s otherwise brought to their attention.

Elavon also mentioned that they are only cutting ties with companies that primarily sell CBD. If CBD is just a small portion of the products you sell, we advise you to call Elavon and put in a formal complaint that they want to cut ties with your business under false grounds.

We anticipate the bank will be getting calls about quite a range of issues over the next few days, so make sure your voice is heard and be part of the movement that makes change happen. Together, we can make sure the next financial institution that accepts CBD merchant accounts is here for the long haul.

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