Why Do Cannabis Payment Processors Get Shut Down?

Why Do Cannabis Payment Processors Get Shut Down?

Cannabis merchant accounts can be terminated due to sponsor bank exits, network rule enforcement, chargeback thresholds, or compliance reviews. This page explains why shutdowns happen.

What This Page Covers

  • Why cannabis processors lose banking support
  • What causes sudden account closures
  • Why shutdowns often affect multiple retailers at once
  • What typically happens to funds during review

The Most Common Reasons Processors Shut Down

  1. Sponsor bank exits cannabis
  2. Card networks tighten enforcement
  3. Chargeback thresholds exceeded
  4. Transaction coding conflicts with network rules
  5. Compliance audits identify elevated risk

Many shutdowns occur because a sponsor bank changes its risk posture, not because a retailer violated state cannabis law.

What Happens During a Shutdown

When a processor loses its banking relationship:

  • Merchant accounts are suspended
  • Transactions are declined
  • Settlement deposits may pause
  • Funds may be held during review

Retailers often learn about shutdowns after transactions begin failing.

Why It Happens More in Cannabis

Because cannabis remains federally illegal:

Every payment relationship depends on a bank’s tolerance for federal risk exposure.

When risk appetite changes, programs end.

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