Lawsuit filed against Trulieve last week in Arizona could have major ripple effects across the country, including in the Massachusetts cannabis industry
In a column published more than two years ago, I warned Massachusetts cannabis retailers about the risks posed by the use of cashless ATM terminals. Now, that risk has come home to roost.
The risk associated with the use of cashless ATMs has been high for a long time, as businesses use the payment systems to circumvent federal banking restrictions. Recently, the risk materialized for Trulieve through a lawsuit in Arizona. The major multi-state operator (MSO) may have left Massachusetts in 2023, but the legal action should still serve as a crucial alert for cannabis retailers here and everywhere, as problems associated with cashless ATMs are quickly rising to the surface, and the consequences could be painful and expensive.
Bottom line: the industry should brace for more enforcement action and lawsuits. Trulieve is the current target, but who will be next? And where?
How the cashless ATM cannabis industry workaround works
Because cannabis remains illegal at the federal level, traditional merchant services are largely unavailable to dispensaries. Debit and credit card networks prohibit transactions related to cannabis, forcing businesses into a cash-heavy model. To work around these restrictions, many dispensaries have adopted cashless ATMs—terminals that process card payments but falsely categorize them as cash withdrawals. This misrepresentation allows cannabis businesses to accept card payments, but it also exposes them to significant regulatory and legal risks.
Cashless ATMs operate by disguising a retail sale as an ATM cash withdrawal. The transaction is routed through the network using Merchant Category Code (MCC) 6011, typically reserved for legitimate ATM cash withdrawals. This trickery enables dispensaries to process payments while violating the rules set by Visa, Mastercard, and other financial networks.
Automatic Teller Machines (ATMs) are widespread, found in banks, stores, gas stations, and entertainment venues. These machines are typically placed at merchant locations by Independent Sales Organizations (ISOs), which sell or lease ATMs and may also handle servicing and cash replenishment. ISOs often work with affiliates who help facilitate ATM placement and management under contractual agreements.
To integrate an ATM into the cash and payment network, ISOs or authorized parties input its details into a Terminal Management System (TMS), which assigns a unique Terminal ID. ISOs must also have agreements with sponsor banks—members of payment card networks like Visa and Mastercard—that enable transactions and ensure compliance with network rules.
ATM transactions begin when a cardholder inserts a debit or credit card and requests cash. The ATM transmits transaction details, including a unique code (MCC6011), to a processor, which routes the request through card networks to the issuing bank. If funds are available, the bank authorizes the withdrawal, and the processor instructs the ATM to dispense cash.
Fees associated with ATM use include network and bank fees, as well as surcharge fees shared among the ISO, affiliates, ATM owner, and merchant. The ATM owner must maintain sufficient vault cash, replenished as needed. Processors track these transactions, ensuring proper settlement of funds between banks, ISOs, and merchants. This process, known as “settlement,” distributes reimbursement for dispensed cash and allocates fees among stakeholders.
ATMs thus function through a complex network of merchants, ISOs, sponsor banks, card networks, and processors, all working together to facilitate secure, efficient cash transactions. In the Trulieve matter, Switch Commerce, a Texas-based company, is the payment processor, and Pueblo Bank & Trust is the sponsor bank.
Trulieve caught in Visa’s crackdown on fraudulent transactions
Trulieve Cannabis Corp. is one of the largest MSOs in the United States, operating dispensaries in its home state of Florida, as well as in Connecticut, Georgia, Maryland, Ohio, Pennsylvania, West Virginia, and Arizona. In the latter, the company operates under the name Harvest; Trulieve acquired Harvest Health and Recreation, the largest cannabis operator in Arizona, in October 2021 in a deal valued at $2.1 billion. This acquisition expanded its footprint significantly.
On Feb. 19, 2025, Switch Commerce, a Texas payment processor, sued Trulieve, several subsidiaries and affiliates, and the company’s founder, Kim Rivers, essentially for their role in allegedly defrauding the card networks. That litigation could spread to other Trulieve states and other operators.
A key tool in Visa’s crackdown on fraudulent ATM transactions is its secret shopper program. Under this initiative, Visa deploys undercover agents to dispensaries to conduct test transactions. These secret shoppers document how transactions are processed, and report back any violations of network rules, such as transactions being falsely categorized as ATM withdrawals instead of merchant sales.
If a customer makes a purchase where the amount is rounded up and the change is returned to the customer, that is a strong indicator of a cashless ATM. If the transaction is for the exact amount and uses a branded card (Visa, Mastercard, etc.), it could indicate that the transaction is being processed under another merchant name, and not as cannabis.
When Visa identified Trulieve as employing cashless ATMs and disguising the transactions, Visa fined Pueblo Bank & Trust $950,000, with $700,000 of the fine suspended but a demand for the immediate payment of $250,000. Pueblo then passed the financial burden onto Switch Commerce, the payment processor, which in turn filed a lawsuit against Trulieve and other entities involved in the alleged scheme.
Unjust enrichment occurs when one party benefits unfairly at another’s expense. Trulieve’s use of cashless ATMs may have allowed it to reap financial advantages while sidestepping proper transaction fees. If found liable, Trulieve may be required to return these ill-gotten gains, potentially facing millions in fines and restitution payments. In the phase of litigation known as discovery, Trulieve could be forced to disclose how many other cashless ATM terminals are in its stores, where, and the names of the associated ISOs or payment processors. This type of high-profile case and that sort of disclosure could cause enforcement actions to spread quickly. Under that theory, it won’t be just the large players at risk, but any cannabis retailer associated with an identified ISO or payment processor. This could cause widespread entanglement of single-store operators.
As of its 2023 10-K filing, Trulieve reported 21 dispensaries and three cultivation and processing facilities in Arizona. In that report, the company acknowledged that major payment networks prohibit processing credit card transactions for cannabis sales, and stated that Trulieve may need to operate on a cash-only basis. However, Switch alleges that Trulieve knowingly violated these restrictions by using cashless ATMs. Before April 4, 2024—when the first transactions on the identified cashless ATMs occurred—at least 149 other terminals linked to Trulieve were already terminated by Switch, its sponsor bank, or the relevant ISO due to similar violations. These terminals used the same settlement account for vault cash reimbursements and surcharge fees.
Kim Rivers, Trulieve’s CEO, co-founder, and a 10% shareholder, has direct oversight of the company’s operations and financial strategy. Trulieve acknowledges that its success depends on her leadership. According to her personal website, she oversees “every activity from seed to sale,” which includes managing licensing, compliance, and financial operations such as payment processing. Switch contends that evidence suggests a deliberate effort to circumvent network regulations, making it difficult for Trulieve to argue that it did not realize its practices were improper.
Hidden costs and potential theft of services
ATM cash withdrawals and merchant purchases are subject to different fee structures. Misclassifying transactions as ATM withdrawals enables dispensaries to avoid higher merchant fees, depriving banks and payment processors of their rightful revenue. This practice constitutes theft of services and, if deemed intentional, could lead to criminal charges and severe financial penalties.
As I noted in a previous column on this subject, in June 2021, a Manhattan federal judge sentenced two former consultants for Eaze Technologies Inc. to 30 and 15 months, respectively, for conspiracy to commit bank fraud in their roles in a scheme to dupe US banks into handling more than $150 million in credit card payments for Eaze as payments to other sham retailers between 2016 and 2019. Eaze’s former CEO pleaded guilty to conspiracy to commit bank fraud in the case prior to the trial.
For years, cashless ATMs have been targeted via a whack-a-mole approach, with one service shutting down and a new provider coming along. But now, cannabis retailers face potential fines and legal action. With the federal government changing its bias toward marijuana, there are likely to be more efforts at compliance from the network administrators.
This crackdown should be a wake-up call for the cannabis industry. With enforcement ramping up, dispensaries continuing to rely on these machines face growing legal and financial risks. If the lawsuit against Trulieve succeeds, it could set a precedent that reverberates throughout the industry, threatening the operations of many cannabis retailers nationwide.
As of this writing, Trulieve has not responded to the suit, but the allegations paint a pretty common and clear picture of the use of cashless ATMs in the cannabis industry.
What this means for the Massachusetts cannabis industry
In the commonwealth, the situation is further complicated by state regulations requiring all ATMs—including cashless ATMs—to be registered with the Commissioner of Banks. Many of the cashless ATMs operating in dispensaries are not properly registered, putting retailers at risk of enforcement actions.
Failure to comply with these regulations can result in fines, forced removal of machines, and potential revocation of business licenses. Dispensaries hosting unregistered cashless ATMs are particularly vulnerable, as state regulators could take action against non-compliant businesses. Retailers can check if their ATMs are properly registered through the Massachusetts Division of Banks ATM registration database.
With federal banking reform for cannabis still uncertain, businesses must explore alternative, compliant payment solutions, such as ACH-based apps. One thing is clear though: the era of cashless ATMs in cannabis dispensaries is nearing its end, and the end could be expensive.
Dan Gardner of Gardner Capital Group alerted us to the lawsuit. Gardner’s subsidiary, Nova Group, LLC is an ISO in the ATM industry. Dan was the first ATM provider I met who understood cannabis, cashless ATMs, and steadfastly refused to offer cashless ATM service due to its risks and illegality.
You can read the full bombshell lawsuit here.
