Metro

Marijuana shops in Mass. go cash-only with fear of federal crackdown

In his most forceful response yet to a threatened crackdown on marijuana by federal prosecutors, Governor Charlie Baker encouraged the US attorney in Boston to instead concentrate on opioids.
Keith Bedford/Globe Staff/File 2017
In his most forceful response yet to a threatened crackdown on marijuana by federal prosecutors, Governor Charlie Baker encouraged the US attorney in Boston to instead concentrate on opioids.

A majority of the state’s medical marijuana dispensaries were forced to stop accepting debit cards from patients Tuesday, after threats of a federal crackdown prompted a key payment processing company to pull out of the Massachusetts cannabis market.

The disruption is exactly what marijuana patients, activists, and businesses feared after a recent tightening in US marijuana policy ordered by Attorney General Jeff Sessions: that the mere specter of prosecutions could subvert the state-regulated cannabis industry, whether or not federal agents actually start arresting operators of licensed dispensaries.

“It was very abrupt and very frustrating,” said Keith Cooper, chief executive of the Revolutionary Clinics dispensary in Somerville, of the payment company’s decision. “It’s a terrible inconvenience for patients, and an additional expense for dispensaries.”

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Cooper said the payment company, Florida’s Merchant Services Consulting Group Inc., called his office Monday to say that recent comments by the top federal prosecutor in Massachusetts hinting at a crackdown on cannabis firms and their financial institutions made it “too risky to continue.” As a result, Revolutionary Clinics and at least nine other medical dispensaries of the 17 currently operating in the state will soon only accept cash.

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Merchant Services Consulting Group did not respond to multiple requests for comment.

With recreational pot sales scheduled to begin in July, Cooper now fears there will be few financial institutions willing to serve Massachusetts marijuana businesses. For example, he said, banks from Colorado, where recreational dispensaries have been selling the drug for four years, were poised to expand into Massachusetts but are now reconsidering. “It’s going to slow them down,” he said.

The ominous remarks from the US attorney in Massachusetts, Andrew E. Lelling, a recent Trump administration appointee, drew an increasingly sharp response Tuesday from the state’s political leaders.

Lelling and other federal prosecutors were given broad discretion by Sessions to pursue cases against anyone involved in the marijuana trade. While other US attorneys hinted — or said explicitly — that they would continue the hands-off approach of the Obama era, Lelling on Monday declined to make a similar promise. Instead he said he would “vigorously enforce” federal rules, raising the prospect that dispensaries, cultivators, and financial institutions could be prosecuted for activities legal under Massachusetts law.

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That prompted Republican Governor Charlie Baker, who opposed the 2016 ballot initiative that legalized pot in Massachusetts, to make some of his most supportive comments about cannabis to date as he urged Lelling to back off on marijuana and focus instead on the deadly opioid crisis.

“What I would stress to him is the big public health crisis we’re dealing with in the Commonwealth these days is opioid addiction and street drugs like fentanyl,” Baker said, according to his office. “A big message to the US attorney’s office should be, if you have limited resources, let’s focus on the thing that is killing people every day here in the Commonwealth.”

The governor went on to say cannabis has “proven to be an effective way to deal with nausea, anxiety, pain, and a variety of other issues.”

A top official at the state Cannabis Control Commission, which will oversee the recreational pot market, went even further, calling the Trump administration’s approach regressive.

“Prohibition has been a failure,” said commissioner Shaleen Title, who said she was speaking for herself and not the agency. “It’s time to let go of the idea of locking people up over marijuana. The people of Massachusetts have been clear that they want a safely regulated industry with new jobs and tax revenue.”

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Steve Hoffman, chairman of the commission, said at a meeting of the agency Tuesday that it would move forward with setting up regulations for the recreational pot industry.

Ironically, the cannabis commission Tuesday approved a program designed by Title to provide incentives to residents of communities with disproportionately high rates of arrests for drug crimes to apply for cannabis businesses licenses.

Lelling has set a tough tone on pot since the decision by Sessions last week to rescind Obama-era policies that protected licensed businesses that work with marijuana, plus their financial institutions, in states where it is legal. He called cannabis a “dangerous drug” and pledged to “aggressively investigate and prosecute bulk cultivation and trafficking cases, and those who use the federal banking system illegally.”

That comment apparently spooked Merchant Services Consulting Group, which handles debit card transactions for most the state’s medical dispensaries. Dispensary owners said the company notified them Monday that it would no longer accept marijuana-related debit card transactions from Massachusetts.

The change, Cooper and others in the state’s medical cannabis industry said, means that dispensaries will have to process more cash and transport deposits to the bank more often, adding to their costs and increasing security risks.

A number of medical dispensaries on Tuesday told customers that they must pay in cash, including Central Ave Compassionate Care in Ayer, In Good Health in Brockton, Healthy Pharms in Georgetown, Ermont in Quincy, and Garden Remedies in Newton, according to online posts and e-mails to patients compiled by marijuana activist Eric Casey. Credit cards have never been accepted at dispensaries.

A group representing patients also decried the move to cash-only transactions, and called on Massachusetts political leaders to shore up the state’s medical marijuana program.

The shift in federal policy has “caused ample confusion within the patient community,” said Nichole Snow, president of the Massachusetts Patient Advocacy Alliance. She asked Baker and Attorney General Maura Healey “to assure us they will offer as much state guidance for vendors and providers as possible, and . . . do what is necessary to protect safe access for patients.”

A congressional budget rider bars the Department of Justice from spending money on most prosecutions of state-licensed medical marijuana operations, meaning the current operating dispensaries should be safe from raids despite the recent policy shift. That amendment is due to expire later this month along with the current federal budget.

Even if that amendment is renewed, it would not protect financial institutions that service marijuana businesses — whether medical or recreational.

So far, the one bank in Massachusetts that dispensaries say provides them with financial services — Century Bank of Medford — appears to be continuing that business. Century did not respond to requests for comment.

Some industry specialists said the withdrawal of Merchant Services hardly signals the end of the marijuana industry in Massachusetts.

The pullback by the payment processor in Massachusetts “is not a good sign at all, obviously, but the sky is not falling,” said Kris Krane, a consultant to numerous cannabis firms in the state. “No one should get ahead of themselves and extrapolate that to mean there’s worse to come.”

However, Krane cautioned that the Trump administration’s posture toward the industry could significantly dampen investment in the space.

“If investors who are interested in the space start backing out because of increased federal actions, that would really impact smaller players,” Krane said. “They already have less access to angel investors than folks who are wealthy.”

Dan Adams can be reached at daniel.adams@globe.com. Follow him on Twitter @Dan_Adams86.