Navigating CBD Compliance: Payment Processing Do’s and Don’ts

Posted May 14, 2025

In Cash Discount Program, CBD Oil Merchant Account, Credit Card Processing, e-Commerce, High Risk Merchant Account, Merchant Service, Next Day Funding, Online Gateway

The CBD industry is booming, with sales projected to hit $16 billion by 2026, but for merchants, the path to success is paved with regulatory hurdles. Strict state and federal rules govern how CBD businesses can process payments, and a single misstep—using the wrong gateway, mislabeling transactions, or partnering with an unvetted processor—can lead to account freezes, lost revenue, or legal trouble. In 2025, as laws evolve, staying compliant is more critical than ever. Whether you’re selling CBD oils in-store or shipping gummies nationwide, here are five essential do’s and don’ts to keep your payment processing on the right side of the rules.

The CBD Compliance Challenge

CBD’s legal status is a patchwork. Federally, hemp-derived CBD with less than 0.3% THC is permitted under the 2018 Farm Bill, but states set their own rules—some ban sales, others require licenses. Payment processors, wary of regulatory gray areas, often flag CBD merchants as high-risk, leading to scrutiny or outright rejections. Non-compliance can trigger chargebacks, frozen funds, or terminated accounts, costing thousands. Mastering these do’s and don’ts ensures your CBD business thrives without regulatory headaches.

Do: Use Compliant Payment Gateways

Selecting a payment gateway designed for CBD transactions is non-negotiable. Standard gateways like Stripe or PayPal often prohibit CBD sales, shutting down accounts without warning. Compliant gateways, vetted for high-risk industries, support CBD-specific needs, such as integrating with e-commerce platforms or handling multi-state tax rules. These systems also ensure transactions align with banking regulations, reducing decline risks.

Action: Research gateways with CBD track records—check processor partnerships and confirm they support your sales channels (online, in-store, or both).

Don’t: Use Misleading or Flagged Terms

How you describe your business matters. Using terms like “marijuana,” “cannabis,” or even “hemp” carelessly in transaction descriptors or website copy can trigger red flags with processors or banks, who may mistake your legal CBD for restricted substances. Vague descriptors (e.g., “Health Products”) also raise suspicions, leading to holds.

Action: Use clear, accurate terms like “CBD oil” or “hemp-derived wellness” in billing and marketing. Ensure your Merchant Category Code (MCC) reflects CBD (typically 5122 or 5912) to avoid miscoding penalties.

Do: Partner With a CBD-Legal Processor

Not all processors are equipped to handle CBD’s high-risk status. Many traditional providers reject CBD merchants outright or impose crippling fees and reserves. A CBD-legal processor, licensed in all 50 states, understands the regulatory landscape and offers tailored solutions, like fraud prevention or chargeback management, to keep your account active.

Action: Vet processors for CBD experience—ask about their banking partners, approval speed, and history with CBD clients. A dedicated account manager can guide you through compliance nuances.

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Don’t: Ignore State-Specific Regulations

While federal law greenlights hemp-derived CBD, states like Idaho or South Dakota impose stricter rules, from outright bans to mandatory labeling. Processing payments in non-compliant states can lead to account termination or legal fines. Even in CBD-friendly states, failing to collect proper taxes or follow licensing can flag your transactions.

Action: Map your sales regions and cross-check state laws (e.g., California’s AB-45 requires specific testing). Work with a processor that adjusts to state-by-state rules, ensuring your payments stay above board.

Do: Monitor Chargebacks and Fraud Closely

CBD’s high-risk label attracts higher chargeback rates—customer disputes over product quality or confusion about CBD’s effects. Processors often penalize merchants with fees ($15-$50 per incident) or account freezes if chargebacks exceed 1% of sales. Fraud, like stolen cards, also spikes in online CBD sales.

Action: Use AI-driven fraud tools to flag suspicious transactions and clear refund policies to reduce disputes. Regularly review chargeback ratios and address spikes immediately to protect your account.

Real-World Impact

A CBD e-commerce startup learned compliance the hard way. Using a generic processor, they faced a $5,000 account freeze after vague descriptors (“Wellness Co.”) triggered a bank review. Chargebacks from unclear state sales added $1,000 in fees. Switching to a CBD-legal processor with compliant gateways, accurate MCCs, and fraud tools cut declines by 80% and saved $3,000 yearly in fees. Their dedicated manager ensured state compliance, letting them focus on scaling. Compliance isn’t just rules—it’s revenue.

Bonus Tip: Build a Compliance-First Mindset

Compliance isn’t a one-time checklist; it’s an ongoing commitment. Stay updated on 2025’s regulatory shifts—states may tighten CBD rules as federal oversight grows. Train staff on compliant sales practices, from labeling to tax collection. Document everything—licenses, lab reports, processor agreements—to defend your business during audits. A proactive approach keeps your payments flowing and your reputation intact.

Leap Payments: Your CBD Compliance Partner

Navigating CBD payment processing doesn’t have to feel like a minefield. At Leap Payments, we simplify compliance with approvals legal in all 50 states, ensuring your CBD business—retail or online—operates without fear of shutdowns. Our dedicated account managers guide you through state-specific rules, compliant gateways, and chargeback management, while our cash discount program (3-4% off for cash) and lower rates than big-box processors like Square or PayPal save you thousands. With same-day funding, all major card acceptance, and free PAX A920 terminals* (*for qualifying merchants), we’re built to keep your CBD business compliant and profitable. Ready to process with confidence? Visit LeapPayments.com to partner with a team that gets CBD compliance.

Stay Compliant, Stay Successful

CBD payment processing is a regulatory tightrope, but with the right do’s and don’ts, you can avoid costly pitfalls. By choosing compliant gateways, using accurate terms, partnering with legal processors, respecting state laws, and monitoring chargebacks, you’ll keep your business thriving in 2025’s evolving landscape. Leap Payments is here to make compliance your strength, not your stress—because your CBD success matters.

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Logan McAuliffe

Merchant service expert, Logan McAuliffe, is a marketing writer for Leap Payments. His interests include playing sports, music and graphic design. Leap Payments is the industry leader in credit card processing and merchant services, offering both high-risk and traditional solutions.