Stripe CEO here: In general, selling anything related to illegal drugs is strictly prohibited by our banking partners. I wish we could be more permissive here, particularly as marijuana legalization gathers pace. That said, it's still illegal at the federal level, and the government doesn't mess around on this stuff.[1] Software is an interesting case; I'm going to go talk to our compliance team to see what we can do.
In general, we try to make our prohibitions clear[2], and we try to give a grace period (the five days referenced) in order to minimize disruption.
If anyone has suggestions for how we could do this better in a world where stringent prohibitions exist, we're all ears. (I'm patrick@stripe.com) We don't like imposing others' rules, but that's part of the reality in operating in the US and on Visa's/MasterCard's/etc. networks.
If banking partners are the problem, why did you mislead him by blaming "customer disputes"?
(Pedantic note: I know full well that the second part of the sentence that actually places the blame on the "risk" doesn't mention customer disputes as the source, but the former part does, and since it's clearly intentionally misleading I am asking why it was necessary to mislead him by mentioning customer disputes. Those seem far from the core problem here, if not outright irrelevant.)
I agree our response should have explained the marijuana restriction. I can't go into specifics for privacy reasons, but I'll add that facilitating marijuana sales wasn't the only factor contributing to the text in this email.
I realize there were probably other factors that contributed to the text in that email, but I think what is interesting to know here is:
Were there any other significant factors specific to his business that made you mention customer disputes as such a significant reason?
(Note that I'm not asking what the factors were, I'm just asking if there simply existed any.)
The reason I ask is, I imagine there might have been other similar businesses with a high rate of customer disputes, and I imagine there may have been other factors in his business that could have resulted in you not wanting to work with them, both of which would be reasonable justifications for avoiding this business -- but what baffles me is how a company with "zero customer disputes over [their] entire history" can get an email blaming his customer dispute risk as the primary concern.
Note that I'm not disagreeing with the soundness of your ultimate decision here, I'm just confused by the email you sent justifying it.
> Were there any other significant factors specific to his business that made you mention customer disputes as such a significant reason?
Unfortunately, yes. Still, explaining the marijuana restriction should've been our primary focus in that email.
In general, we would never close an account that had a reasonable explanation for high dispute rates (unless card networks or banks forced us to). Our goal is to help users manage their disputes, and in the long term to not have to worry about them at all.
You did right by your business and other customers.
The risk of supporting a single company who chose to participate in the illegal drug market (yes, Marijuana is illegal still under the Fed folks) far exceeds any potential benefits they could of brought.
Frankly, the article and title are written by someone who is upset they didn't understand the reality... It's rather unreasonable to blame Stripe here for their own ignorance.
> A few months ago we started using Stripe as they payment gateway for our marijuana regulatory compliance software
As far as the Fed is concerned, any support of the illegal drug trade industry is a Felony. Selling software that is targeted at helping manage, distribute, and facilitate the marijuana industry (which is illegal federally) is against the law.
As far as Stripe is concerned, they are regulated by the Fed and cannot afford to knowingly have illegal drug market customers sending money through their network.
> As far as the Fed is concerned, any support of the illegal drug trade industry is a Felony. Selling software that is targeted at helping manage, distribute, and facilitate the marijuana industry (which is illegal federally) is against the law.
As somebody with extensive experience in building and selling regulatory compliance software to the gambling industry, I can state beyond a shadow of a doubt that your argument is bullshit. Selling software that explains what is legal and what isn't legal in any specific jurisdiction isn't illegal at all, and doesn't do anything that facilitates the breaking of the law (actually, it is quite the opposite).
> As far as Stripe is concerned, they are regulated by the Fed and cannot afford to knowingly have illegal drug market customers sending money through their network.
> As far as the Fed is concerned, any support of the illegal drug trade industry is a Felony
The Feds. The Fed is mostly concerned with managing the money supply.
And that's not exactly true, even then (the laws are a lot more specific and complex, not everything that could be described that way is prohibited at all, and some of what is prohibited under federal law that way is not a felony.) But its a reasonable approximation.
> Selling software that is targeted at helping manage, distribute, and facilitate the marijuana industry (which is illegal federally) is against the law.
That's quite possibly true, and I can easily see other businesses not taking the risk of getting involved in case it is.
OTOH, if you are going to claim that it factually is, it wouldn't hurt to cite the specific law.
> As far as the Fed is concerned, any support of the illegal drug trade industry is a Felony.
Then there are literally 1000s of business owners in dozens of states in lighting, electrical, communications, real-estate, security, software, internet-service, legal, finance and investement industries committing felonies at this very moment.
Indeed there are. Many businesses are committing crimes without even realizing it, especially things like structuring. These crimes are often selectively enforced.
>> A few months ago we started using Stripe as they payment gateway for our marijuana regulatory compliance software
> As far as the Fed is concerned, any support of the illegal drug trade industry is a Felony.
Are you saying the seller has probably committed a felony by selling this software?
Because if true, I would think they would have been incredibly stupid to draw attention to their business on the HN front page, which they do not seem to be.
I think it's completely legit for you to pick your partners.
Can you comment on the 5 day warning, though?
Speaking as a quality professional with some experience with billing, the idea of identifying and transitioning to a new payment processor with proper testing and zero business downtime within 5 days isn't very realistic. If a company abstracted their payments up front, great, but for a small firm it's likely there's tight coupling there. Customer communication also isn't instant, and I assume subscription authorizations have to be transitioned as well--probably by the customers themselves.
It would be one thing if you stopped people at the door, but once they're dependent this seems rather harsh unless they've somehow egregiously violated business ethics in a way that's harmed you. You're pretty much guaranteeing a business interruption, and that can be fatal for a small firm.
And from a strictly pragmatic point of view, this is the sort of action that would make me hesitant to pick you for an upcoming project. When I judge risk vs. worst case outcome, the very fact that your worst case is a surprise interruption would put you on the wrong side of the line even at a low risk.
This is essentially a provider uptime decision, and it's easy to see this as unpredictable between 5-9s and zero. That's not a good quality for a payment processor.
Disrupting businesses is the last thing we want, which is why the 5-day warning isn't a hard deadline. We always give people as much time as they need to transition off (as long as we don't suspect fraud). In this case, we'd have agreed to extend the deadline but weren't asked.
As this is the second time I see companies complaining on HN about the short deadline, and there seems to be a consensus that transitioning to another payment provider realistically always takes more than 5 days, you might consider having a longer default deadline that makes it possible to transition in time. Just my 2 cents.
I find it really disturbing that the federal government can do an end-run around the 2nd Amendment by putting the squeeze on banks and payment processors via the DoJ / FDIC to shut down bank accounts of firearms retailers and prevent them from processing credit cards. Regardless of how you feel about firearms, it's still a Constitutionally-protected right.
(Noticing that "weapons and munitions" are on Stripe's prohibited businesses list and the corresponding category in Operation Choke Point)
If you think that is disturbing then you should wonder how the rest of the world feels whenever America decides that its local laws should be applied in foreign countries.
Not sure I follow the thread of logic, but I do find quite a lot of what the US government does both at home and abroad disturbing - if not sometimes illegal and/or immoral - and am acutely aware of how that reflects negatively on us American citizens. That includes your example.
And yet, the 2nd amendment only covers our right to keep and bear, not our right to the business apparatus necessary to make them practical and affordable in modern times.
I see that "weapons and munitions; gunpowder and other explosives" are classed with illegal drugs, when in fact it's perfectly legal to buy such things online (with certain laws in mind). Any reason for this?
Just because it's strictly legal doesn't mean Stripe's banking partners or card networks will allow the transactions. In general, Stripe's prohibited businesses list is generated from partner rules and not directly from the laws.
As another example, note that Stripe prohibits transactions related to the adult entertainment industry. There's nothing illegal about that, it's just that Stripe's business partners don't want to take on the chargeback liability.
I've used Stripe for years and I'm firmly on your (Stripe's) side here. As a small business owner, Stripe has always been the most reliable, trustworthy and just plain best implementation. We don't take PayPal at all, despite its ubiquity.
Kudos here, I believe you guys are doing the right thing here with what you are given. It sucks that this has to be the outcome for people just trying to help a growing industry because of the current state of things.
I do suggest however maybe in the future when sending out those service disruption emails give more details to prevent random outbreaks by seemingly ill informed owners about why in fact they were told they could no longer user your services.
As a fellow business owner I can empathize with the apprehension. We've been approached about building apps for the marijuana industry and have a lot of debates around whether that puts us into a precarious position. The consensus is that we would not be held accountable for simply providing a service especially given that it would not directly relate to the transaction of the actual product nor would it be part of the path that would be considered "laundering." I understand where you're coming from. It's tough to be put in a position in which you believe you may be putting your company at risk, but I think Stripe is missing an opportunity that could position the business as a leader to help change the precedence. Just my two cents. Nice response though. Love seeing business owners here defending their position instead of cowering to poorly written diatribes.
It's good of you to answer and work towards a resolution. However, it doesn't give me much hope that the same would be done when if I was in a similar situation. I've seen many people complain loudly and get PayPal to be reasonable with them, but since I don't have an audience like that, I just get screwed.
You didn't just get screwed... you screwed yourself.
You screwed yourself the day you chose not to read Stripes ToS. You screwed yourself the day you chose to violate Stripe's ToS. You screwed yourself the day you chose to ignore Federal Law.
The post you replied to is not the author of the article. Rather, they are stating that when/if they should find themselves in a dispute with one of their providers, their lack of clout means they would be unlikely to get the same "CEO of provider will look into it" responses.
Accusing them of violating a ToS as well as federal law is uncharitable to say the least.
> Too bad things don't work that way, otherwise we'd have to arrest all the state governments that have approved medical or recreational use
Actually they do work that way.
And yes, the Fed has had a standoff with many States, and yanked funding for things in some cases. Also the DEA has been known to raid long standing medical marijuana clinics in CA. The current administration is a little lax on Marijuana, but that doesn't somehow make the law not apply here (The next administration could come down with a whip).
At the end of the day, there is no other way to slice it. Supporting marijuana in any capacity is currently against federal law.
What, where is this coming from? Selling software for the marijuana industry doesn't appear to be explicitly covered by Stripe's prohibited business (it says "Marijuana dispensaries and related businesses", but how far does that extend?)
Stripe themselves further cloud the issue by claiming it as a high risk of customer disputes, which is demonstrably bogus and a black mark against them.
>If anyone has suggestions for how we could do this better in a world where stringent prohibitions exist, we're all ears.
The author defined his business as "marijuana regulatory compliance software." Therefore, not enough information is given. If the software was purely for medical marijuana regulatory compliance. Then I think Stripe should continue to work with the company, but as it relates to recreational marijuana that is where Stripe should draw the line.
This is not a morale position, but a legal one. Why?
>it's still illegal at the federal level
Yes; however, one may reasonably rely on the representations of the Government. Moreover, in this particular instance the Gov. (via Attorney General Eric Holder) publicly has taken the legal position that the Federal Gov. would not enforce the Federal Marijuana laws against persons who comply with state medical marijuana laws. What Stripe is dealing with is a Software to ensure compliance with these very laws that the Federal Gov is using as the basis for their Federal enforcement (so long as the Software is limited to medical and not extended into recreational).
> Yes; however, one may reasonably rely on the representations of the Government.
In criminal law, the only case that I am aware of where this is a defense against later prosecution is where you reasonably rely on the advice of those responsible for enforcing a particular law that a particular act is not against the law -- a representation by law enforcement that something is a violation of the law but is not a current enforcement priority would not suffice for (indeed, would directly oppose) such a defense.
If you have cases, etc., that suggest otherwise, I'd like to see them.
I'm sure we are both speaking of US v. Barker. And your distinction is well taken, i.e. interpretation of law vs enforcement of law. That said based on Holder's statements I think the argument extends to existing case law of mistake of law. A hypothetical Defendant could certainly argue there was reasonable reliance on the misinterpretation of the law. Moreover, argue that Holder's statements were not simply limited to issue of enforcement, but more generally applicability to persons in compliance with State Medical Marijuana laws. Certainly, the Gov. could not simply trick people into committing crimes by saying we will not enforce "x",then begin mass arrests and later at trial argue the defense of mistake of law does not exist because the Gov's official statement was limited to enforcement not interpretation. Again your distinction is correct, and may be pushes this to a case of first impression.
I am not sure the impact practically or legally, but obviously lawyer's can advise these businesses (even in the recreational realm) in these states, so maybe pivot your software as legal service software, license it to law firms and have them re-license it to their own clients. Sucks to inject an otherwise unnecessary middleman into the equation, but you already have that with payment processors, banks, card issuers, ect...
It seems like the real problem here is the administrative process... the OP makes it sound like a unilateral decision with no recourse... and maybe less extreme measures could have been taken, such as letting them know what aspect of their business was high risk and giving them a chance to spin it off instead of just booting them. It is incredibly inconvenient to have to switch payment processors unexpectedly, and having a reputation for booting customers unilaterally will not benefit your company.
That's an insane list. Some of these are really non-obvious, especially for non-Americans, so I think they should be communicated much clearer up front.
(By non-obvious I mean, stuff millions of people are used to paying for online and offline with various legal forms of payment other than cash, including credit cards. That btw also puts a bit of a question mark on the "it's the banking partners, not us" argument.)
Yes. They are called analogues and these laws were created ostensibly in response to the trend of "designer drugs" being developed to evade their scheduling as illegal drugs, by staying ahead of the schedules.
There was a crackdown in smoke-shops in New York on the weed-not-weed "synthetic marijuana" and "functional analogues" of cannabis. For a while you could go into any hookah lounge or corner smoke shop, see a case on the counter with 1g and 2g silver-colored ziplock bags, or 5-10g jars... ask for some "incense" or read whatever it says on the bag out loud (and don't say "spice" because K2/spice had already been scheduled).
You'd receive a bag of something that looks like weed, with labels clearly indicating it was not to be marked or marketed for human consumption, that it was a novelty item and definitely not safe, but if you tried it and you actually knew what marijuana was but for some reason couldn't get any real bud, you'd probably agree it was a passable substitute.
Then these shops all started getting visits from the state police, and you couldn't buy them anymore. Their whole inventory would be seized, under the new (at the time) Federal Analog Act.
I hear you can still get salvia and kratom, but I also heard those are both really not anything like cannabis, other than both being organic and having pharmaceutical applications, that you really couldn't easily use either of those and be at all confused about whether it was pot or not.
In general, we try to make our prohibitions clear[2], and we try to give a grace period (the five days referenced) in order to minimize disruption.
If anyone has suggestions for how we could do this better in a world where stringent prohibitions exist, we're all ears. (I'm patrick@stripe.com) We don't like imposing others' rules, but that's part of the reality in operating in the US and on Visa's/MasterCard's/etc. networks.
[1] https://en.wikipedia.org/wiki/Operation_Choke_Point
[2] https://stripe.com/us/prohibited-businesses