André Herrera (Courtesy photo)
(This is a contributed guest column. To be considered as an MJBizDaily guest columnist, please submit your request here.)
For most of its state-legal life, the cannabis industry has relied on a series of workarounds in lieu of traditional payment systems such as debit and credit cards.
Operators have relied on cash, cashless ATMs, and loosely coded merchant accounts as an approximation of what other businesses take for granted. These systems, which weren’t built for compliance, were constructed around the realities of harsh regulatory requirements and inconsistent infrastructure.
That made them one compliance review away from disappearing.
Industry leaders and veterans already know this. Accounts using these workarounds can get shut down overnight. Processors pull back without warning. Funds get frozen or delayed while payroll and vendor payments hang in the balance.
For years, that instability was accepted as part of doing business in a federally illegal market. But something is changing. Cannabis payments are starting to grow up.
Are cannabis industry workarounds for payment solutions going away?
Early forms of cannabis payments were products of necessity. With traditional credit and debit card processing off the table, operators and payment providers found ways to make transactions work, even if they pushed the limits of compliance.
Cashless ATMs became ubiquitous. Merchant coding workarounds filled the gap. Operators cycled through payment processors, aware any solution could disappear with little notice. These tricks kept operations moving, but that era is coming to a close.
Regulators and card networks are tightening enforcement. Payment models that rely on grey areas are being shut down or scrutinized. What once passed as innovation is now increasingly viewed as a liability with a ticking clock.
At the same time, more transparent, regulator-aligned models are gaining traction. Credit unions and regional financial institutions are stepping into the space with clearer frameworks. Payment providers are building systems designed specifically for cannabis rather than adapting traditional tools after the fact and hoping nobody notices.
For example, partnerships between cannabis-focused platforms and financial institutions — like Lüt’s work with credit unions and compliance partners such as Safe Harbor Financial and Green Check Verified — are creating payment environments that are structured to withstand scrutiny instead of avoid it. These models emphasize closed-loop systems, clear audit trails and direct alignment with state regulations.
For operators, that distinction matters.
As cannabis matures amid federal rescheduling, stability is a must-have
This shift is happening as the business environment becomes less forgiving. In markets such as Michigan, retail prices are dropping to historic lows. Price compression is squeezing margins across the supply chain. At the same time, operators are navigating layered tax burdens that further compress profitability — a situation that for most will continue even after medical cannabis’ reclassification as a Schedule 3 drug.
Unreliable payments in that environment are absolutely a nuisance. But it’s worse than that: they’re a threat to an operator’s survival.
When funds are delayed or accounts are disrupted, the impact is immediate. Payroll may be missed, vendors wait or file suit. Inventory decisions tighten. Operators become more conservative at the exact moment they need flexibility.
And in an industry with notoriously thin margins, no one is in a position to absorb that kind of friction.
Operators are not asking for new financial products or complex tools. They are asking for predictability — to be able to accept digital payments, access funds on a reliable timeline and operate without constant concern that a processor or bank relationship could vanish.
That baseline expectation is finally becoming realistic.
The rise of purpose-built cannabis payment systems
Cannabis is no stranger to irregularities and fragmented regulatory environments. As we all know, state cannabis regulatory frameworks are highly structured and enforced, while federal policy remains unresolved even after April’s historic final order. That disconnect forces operators to navigate two competing systems at once while relying on payment models that exist in policy gaps.
These days, financial infrastructure is intentionally designed to meet state regulatory expectations, rather than serve as a workaround.
Purpose-built payment systems are emerging that prioritize traceability, auditability and clear alignment with state oversight. Closed-loop models are one example, allowing transactions to remain within a controlled ecosystem that reduces dependency on traditional card networks while maintaining visibility for compliance purposes.
While the fates of adult-use cannabis rescheduling and federal action like the SAFER Banking bill remain uncertain, operators are adopting systems that reflect how cannabis is actually regulated today, not how it may be treated in the future.
In that sense, compliance is now the foundation on which those payment systems are built.
How cannabis payment systems have shifted towards legitimacy
Compliant payment systems reduce risk, increase transparency and bring cannabis operations closer to the standards expected of any other regulated industry. The shift away from unpredictable workarounds to reliable compliance is happening now, driven by operators and financial partners moving away from short-term fixes and toward solutions built to last.
For businesses, the takeaway is clear: the era of patchwork payments is ending. What replaces it may not be perfect, but it is more stable, more predictable and far better aligned with the realities of running a modern retail operation.
Operators who continue to rely on workaround-driven models may find themselves increasingly exposed as enforcement tightens and margins shrink. Those who invest in compliant infrastructure are better positioned to operate with confidence.
For the first time, the industry is building financial systems that resemble those of any other sector. Not because the rules have suddenly changed, but because the infrastructure finally has.
André Herrera is chief compliance officer at Lüt, where he leads compliance strategy for its closed-loop payments platform serving cannabis and other high-risk industries.
