Some credit card processors simply lump kratom with marijuana and refuse to provide merchant accounts for either substance. Others are willing to provide merchant accounts for kratom, but you can expect to go through a lengthier approval process and pay fees that reflect kratom’s high risk processing status.
What is “high risk” processing?
High risk credit card processing refers to businesses that are deemed riskier for a processor to underwrite. The risk could come from age-restricted items, heavily regulated items, industries with higher than normal chargeback rates, and more. Kratom, along with marijuana and CBD, is considered a “high risk” industry partly due to its complicated legal status. The US Food and Drug Administration has cracked down on kratom imports, in some cases seizing or destroying the product. While it’s a good idea to ensure a product is available for customers before charging for it, there are some situations where businesses charge upon order placement and then cannot fulfill the order. That can result in chargebacks. Higher than normal chargebacks are another reason that industries may deemed high risk. These complicated variables means you’ll need to seek a high risk processor that explicitly serves kratom businesses.What is kratom?
Kratom is part of a tree. Specifically, it’s from the leaves of a tree native to southeast Asia. It’s typically sold either in loose powder form or in capsules at dietary supplement stores or dispensaries. Advocates of kratom argue that the substance helps with medical issues ranging from anxiety to depression to chronic pain.Differences Between Kratom and Marijuana
Kratom and marijuana are entirely separate plants. Kratom does not contain THC, the chemical in marijuana that’s responsible for the feeling of being high. Neither has been studied extensively, but users often claim that the two provide relief from chronic pain and medical problems.Differences Between Kratom and CBD
CBD is more closely linked to marijuana in the sense that it’s from the same plant, but it also lacks THC. In that sense, it shares some similarity to kratom. Proponents of both kratom and CBD point to the fact that neither substance gets you high but can provide relief from various ailments.Kratom and the DEA
A few years ago, the United States Drug Enforcement Administration (DEA) planned to ban the sale of kratom and classify it as a “schedule I” drug. That is, a drug the DEA reports has no currently accepted medicinal benefits and high potential for abuse. Other schedule I drugs include heroin, ecstasy, LSD, and marijuana. However, the DEA delayed the ban in order to take public comment. Kratom, CBD, and marijuana users all feel that their preferred supplement should not be considered a Schedule I drug. Some medical professionals agree. On the flip side, the US Food and Drug Administration released a statement on mounting concerns surrounding kratom, claiming the agency is aware of 36 deaths associated with kratom-containing products and presenting the stat, “Calls to U.S. poison control centers regarding kratom have increased 10-fold from 2010 to 2015, with hundreds of calls made each year.” The statement also claims that the agency has concerns due to kratom’s similar effect as opioids, including the possibility for addiction. Which brings us to the most important question:Is it Legal to Sell Kratom?
At the time of this publication, kratom is not federally illegal. That status is subject to change pending further study of the substance and its effects. However, despite current federal legality, it may be illegal at state or local levels. This is the opposite of marijuana, which is currently federally illegal but "legal" in some states. As of late 2018, it’s legal to sell kratom in some states and not in others. In a few cases, it’s legal overall in a state, but prohibited within certain cities or counties. The substance’s legality is in flux, so be sure to check with a licensed attorney in your area if you have specific questions. States with known rules about kratom include:- Alabama (banned as schedule 1 controlled substance)
- Arkansas (banned as controlled substance)
- California (illegal in San Diego)
- Florida (illegal in Sarasota County)
- Illinois (cannot be sold to minors under 18; illegal in Jerseyville)
- Indiana (banned as a “synthetic drug”)
- New Hampshire (not for use by minors under 18)
- Tennessee (banned as a controlled substance)
- Wisconsin (banned as schedule 1 controlled substance)
Unsubstantiated Health Claims
One area that trips up kratom sellers is a problem that plagues the nutraceutical industry: unsubstantiated health claims. Any product or dietary supplement that makes a health claim without FDA approval will have a more difficult time securing a merchant account. Unsubstantiated health claims can be as vague as “helps with sleep” or as specific as “relieves headaches in 5 minutes.” The FDA has begun issuing warning letters to kratom vendors that make health claims about kratom, including touting it as an effective tool for battling opioid addiction. An official statement quotes FDA commissioner Scott Gottlieb, MD, “Despite our warnings that no kratom product is safe, we continue to find companies selling kratom and doing so with deceptive medical claims for which there’s no reliable scientific proof to support their use. As we work to combat the opioid epidemic, we cannot allow unscrupulous vendors to take advantage of consumers by selling products with unsubstantiated claims that they can treat opioid addiction.” While many products add a disclaimer that statements have not been evaluated by the FDA, that won’t help you get a merchant account more easily. If you’re selling a dietary supplement or similar product, the ideal route is to secure FDA approval. When that’s not possible, it’s best to avoid unsubstantiated health claims.Finding a Kratom Credit Card Processor
The first thing to do is determine if you’re in a state where kratom is legal, as processors will not allow you to open a merchant account selling an illegal product. If you’re legally allowed to sell kratom, you should seek out “high risk” credit card processors that specifically state that they will work with kratom vendors. It’s important that you not try to fudge the details of what you’re selling. Processors will find out eventually, and you’ll have your merchant account shut down and may be liable for fines or pursued for fraud. You can try CardFellow’s high risk merchant account tool to locate processors that specialize in high risk businesses. Be aware that processors may require additional information or take longer to review an application for a high risk business, especially in the kratom space. If you’ve exhausted your domestic options, you may need to consider an offshore merchant account. Like the name implies, these accounts are issued by processors outside of the United States, meaning they’re not subject to the same rules as domestic providers. However, expect to pay a hefty price for an offshore merchant account. Do you sell kratom in a legal state? Have you had trouble securing credit card processing? We want to hear from you! Leave a comment with your experience.
Ben Dwyer
Ben Dwyer began his career in the processing industry in 2003 on the sales floor for a Connecticut‐based processor. As he learned more about the inner‐workings of the industry, rampant unethical practices, and lack of assistance available to businesses, he cut ties with his employer and started a blog where he could post accurate information about credit card processing. As the blog gained in popularity, Ben began directly assisting merchants in their search for a processor. Ben believes in empowering businesses by providing access to fair, competitive pricing, accurate information, and continued support. His dedication to transparency and education has made CardFellow a staunch small business advocate in the credit card processing industry.
