Merchant Services in the Vaping Industry After the 2018 Farm Bill

The passage of the 2018 Farm Bill significantly changed the landscape of merchant services in the vaping industry. For vape shop owners selling CBD products, this change created new opportunities to lower risk profiles and secure reliable payment processing options. In this article, we’ll explore how the 2018 Farm Bill reshaped merchant services for the CBD vaping market, reduced risk factors, and expanded choices for business owners.

What the 2018 Farm Bill Changed for CBD Products

The 2018 Farm Bill was pivotal for the CBD industry. It reclassified hemp and hemp-derived products, including CBD, from the Controlled Substances Act as long as the THC content remains below 0.3%. This distinction is crucial. While CBD itself is no longer federally controlled, products with THC concentrations above 0.3% remain illegal.

This reclassification profoundly impacted risk profiles associated with CBD products. Before 2018, payment processors and merchant services viewed all hemp-derived products as high risk. This view limited the options available to CBD vendors. However, by differentiating between legal CBD products and illegal THC products, the Farm Bill allowed merchant services to consider CBD businesses in a lower-risk category. As a result, new opportunities for secure payment processing emerged.

How Merchant Services Were Affected Before and After the Farm Bill

Before the Farm Bill, merchant services providers hesitated to work with CBD businesses due to regulatory uncertainty and the perceived high risk of chargebacks. This hesitance limited the payment options for CBD vape shop owners, who often relied on high-cost or offshore processing services. Consequently, the lack of reliable payment options increased business risks and limited growth potential.

However, since the passage of the 2018 Farm Bill, the CBD industry has experienced significant growth. According to a report by Statista, U.S. sales of CBD products grew from $620 million in 2018 to over $4 billion by 2023. This growth, along with clearer regulatory guidelines, encouraged more merchant service providers to enter the CBD market. Now, vape shop owners can select from various payment processors that understand the unique needs and regulatory requirements of the CBD industry.

Top Merchant Service Providers for CBD Vape Shops

Today, vape shop owners have more choices when selecting a payment processor. Here are three merchant service providers known for working with CBD businesses:

1. Square

Square has gained popularity among CBD businesses. It offers a straightforward onboarding process and competitive transaction fees. Since entering the CBD space, Square provides features like transparent fee structures and fraud protection. This makes it easier for vape shops to start accepting credit card payments with reduced risk.

2. PaymentCloud

PaymentCloud specializes in high-risk merchant accounts, including CBD businesses. This provider offers extensive fraud prevention tools, fast application processing, and dedicated support teams familiar with the challenges faced by the vaping industry. PaymentCloud’s experience with high-risk profiles makes it an attractive option for vape shop owners seeking stability and compliance.

3. Easy Pay Direct

Easy Pay Direct is known for serving industries with unique regulatory requirements, making it a solid option for CBD vape shops. This provider offers a seamless setup process, high-quality fraud detection, and strong customer support tailored to high-risk businesses. Their solutions focus on reducing chargebacks and maintaining compliance, making them a reliable choice for CBD retailers.

Practical Tips for Vape Shop Owners to Lower Their Risk Profiles

Given the increased availability of merchant services, vape shop owners can take specific actions to further reduce their risk profiles and enhance their chances of approval. Here are some practical tips:

• Maintain transparent labeling: Clearly label all CBD products, ensuring THC levels are below 0.3%. This transparency reassures payment processors that products comply with federal standards.
• Verify product sourcing: Document that all products are derived from federally legal sources. Partnering with certified suppliers demonstrates commitment to compliance.
• Manage chargebacks effectively: High chargeback rates can increase perceived risk. Work with payment processors that offer chargeback protection and implement policies that encourage customer satisfaction.

Federal Compliance Considerations

Staying compliant with federal regulations is crucial for CBD vape shop owners looking to maintain a low-risk profile. The following federal guidelines can help:

• Ensure THC content compliance: Regularly test products to confirm that THC levels remain within the legal 0.3% limit.
• Keep accurate records: Maintain documentation of all lab tests, purchase records, and supplier certifications. If requested, this documentation proves adherence to legal requirements.
• Stay updated on federal laws: Regulations around CBD continue to evolve. Regularly review updates from industry groups like the U.S. Hemp Authority to stay informed about legal changes that might affect your business.

Conclusion

The 2018 Farm Bill brought substantial changes to merchant services in the vaping industry, especially for CBD products. By reclassifying hemp-derived CBD, the bill opened doors for more payment processing options, giving vape shop owners the chance to expand their businesses with reduced financial risk. By choosing the right merchant service providers and following federal compliance standards, vape shop owners can leverage these developments and secure reliable, low-risk payment processing solutions.