The cannabis industry has been making headlines in recent years with its rapid growth and increasing legalization across the United States. However, as the industry continues to expand, it is still facing numerous challenges and barriers, especially when it comes to accessing financial services.
One major obstacle for cannabis businesses is the lack of access to traditional banking and payment processing options due to federal illegality. This has led to a reliance on alternative payment methods, such as pin debit transactions, which have become crucial for the industry’s operations.
However, even these alternatives are not immune to challenges and difficulties. This was highlighted recently when a cannabis-friendly payment processor announced its shutdown and filed a lawsuit against one of its financial services vendors.
The lawsuit between FP Omni Technologies and TSYS Acquiring Solutions, LLC has shed light on the challenges that cannabis businesses face in accessing essential financial services. The case revolves around allegations of false representation and breach of contract by TSYS, a major financial services vendor.
According to a press release by FP Omni, they entered into a long-term written agreement with TSYS in 2019 for payment processing services. However, they claim that TSYS misrepresented their ownership and control over the payment gateway through which FP Omni’s transactions would be processed.
Furthermore, FP Omni alleges that TSYS did not have the authority to provide payment processing services without the consent of other entities despite claiming otherwise. These alleged misrepresentations and breaches of contract led to significant issues for FP Omni, ultimately resulting in their decision to wind down operations.
Denying Request For Dismissal
In September 2023, the court denied TSYS’ request for dismissal of the lawsuit and allowed FP Omni to proceed with their claims. This was a significant step in the legal battle between the two companies.
FP Omni is seeking compensatory and punitive damages for the impact that TSYS’ alleged misrepresentations and breaches of contract had on their business. The valuation of the company has been estimated to exceed $500 million, making this a high-stakes case for both parties.
The court’s decision not only allows FP Omni to seek financial compensation but also gives them the opportunity to gather evidence that could potentially shed light on the actions of TSYS and others in shutting down a legal cannabis payment processor. This lawsuit may reveal new insights into the challenges faced by the cannabis industry in accessing financial services and the possible involvement of larger entities in hindering its progress.
One key aspect of FP Omni’s operations was its use of pin debit transactions, which had become a crucial method for cannabis businesses to access payment processing services. As the federal government still considers cannabis illegal, traditional banking and credit card processing options are not available for the industry. This has left cannabis businesses with limited alternatives, such as pin debit transactions.
However, even these alternative methods face challenges, as seen in the case of FP Omni. This highlights the extreme difficulties that still exist in just running a cannabis business and being paid accordingly. The federal illegality of cannabis continues to hinder the industry’s growth and poses significant challenges for businesses operating within it.
Overall, the lawsuit between FP Omni Technologies and TSYS Acquiring Solutions, LLC brings attention to the ongoing struggles faced by cannabis businesses in accessing essential financial services. The court ruling in favor of FP Omni allows them to seek damages and potentially uncover new insights into the obstacles faced by the industry.
It also highlights the importance of alternative payment methods, such as pin debit transactions, in filling the gap left by traditional banking and credit card processing options. Until there is a change in federal laws surrounding cannabis, these difficulties will continue to impede the growth and success of businesses within the industry.
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