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Everything PSPs Must Know Before Approving CBD Merchant Accounts

Later this week, the U.S. Food and Drug Administration (FDA) will host its first public hearing to discuss all details related to the promotion and sale of CBD products and other cannabis derivatives.

As federal agencies continue to build the framework for CBD sales, payment service providers (PSPs) should weigh a few considerations before approving CBD merchant accounts.

Where the Confusion Surrounding the Sale of CBD Products Stem

In December, the 2018 Farm Bill was signed into law, removing hemp and its extracts, including hemp-derived cannabidiol (CBD), from the Drug Enforcement Administration’s Controlled Dangerous Substance List. It decriminalized CBD and industrial hemp in the nation, creating promising opportunities for sellers and the PSPs that onboard them.

Things became very confusing for sellers, PSPs, and the public after the FDA issued a statement, noting it had the authority to regulate these products and that it was illegal to sell any food, drink, or supplements that contained CBD. The FDA stated that since it had approved the CBD-based epilepsy medicine, Epidiolex, it would treat other CBD products the same, meaning it could put each item through its rigid review process before it could be legally sold.

This left sellers, PSPs, and states scrambling and guessing how to move forward. The FDA’s public hearing scheduled for May 31 at 8 a.m. (EDT) is a step in the right direction.

According to the FDA, the goal of the hearing is to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds.

Those who did not register to attend the hearing can view it via webcast. Anyone interested in commenting on the hearing must submit written or electronic comments by July 2.

Government moves slowly, so any person or entity involved in CBD should not hold his breath waiting for clear direction. Until the agency provides more guidance, payment service providers should consider these factors when assessing businesses for CBD merchant accounts:

1. Steer Clear of Merchants Marketing Edible CBD Products or Dietary Supplements
The FDA continues to stand by its statement that marketing CBD as a nutraceutical or into any foods or drinks is illegal. Following this statement, the New York City Health Department notified businesses that sell edibles with CBD could face fines, embargoes, or reductions in their health letter grades. The city’s action take effect on Oct. 1. Other states, like Maine, North Carolina, South Carolina, and Ohio, banned CBD in food. Therefore, PSPs should avoid these merchants until they get more clarity on this regulation.

2. Ensure that Businesses Do Not Make False Claims About CBD
Unless the FDA approves a product as a drug, no item can be marketed, promoted, or implied to prevent, treat, or cure any condition. Posting any such claims on product labels, in advertising materials, on websites, or social media would be illegal. Many believe that CBD can help a host of conditions from depression to pain, but there is no scientific evidence to back it up. Until there is research or the FDA changes its stance on CBD, PSPs are taking a risk onboarding these merchants.

3. Make Sure Merchants Do Not Sell to Places Where CBD Is Illegal
Though many states likely will embrace the sale of CBD as oversight is determined, states do not have to decriminalize CBD and hemp. For example, Idaho, regulates CBD as a controlled dangerous substance. It is critical that PSPs and merchants stay on top of any updates or revisions to laws in the areas where they want to sell.

In Conclusion

Hopefully, the FDA’s hearing will be the start to a better understanding of how CBD sales should be handled in the U.S. Until there is more clarity, payment service providers should pay attention to new developments and be cautious before approving CBD merchant accounts to businesses.

Apply for a CBD Merchant Account

If you are in need of a CBD merchant account, apply online with (EMB). It offers a simple and quick application process.