Benzinga - by Maureen Meehan, Benzinga Editor.
FP Omni Technologies, a Georgia-based company that has provided dispensaries and their customers with a compliant way to process legal cannabis transactions since 2020, is throwing in the towel. But on its way out, the company is launching a $500-million lawsuit against TSYS Acquiring Solutions, a subsidiary of Global Payments Inc (NYSE: GPN). In a Dec. 27 press release, FP Omni said its downfall “arises out of its inability to continue with the payment processing services promised” by TSYS.
What Happened
The dispute centers on a 2019 agreement wherein TSYS facilitated payment processing for merchants associated with FP Omni. In its complaint filed in 2022, FP Omni accused TSYS of falsely representing its ability to provide those contracted services through October 2024.
TSYS, says FP Omni also made promises about controlling the cannabis payment gateway, guaranteeing smooth sailing through the uncertainties of federal marijuana restrictions.
In 2021, the situation took a turn when Visa (NYSE: V), not TSYS, emerged as the ultimate gatekeeper and then proceeded to ban all cannabis-related transactions. Shortly after that, Mastercard (NYSE: MA) did the same.
FP Omni's lawsuit contends it was misled and would never have ventured into this controversial sector had it known Visa would end up at the helm.
Read more: Bank Of America, Mastercard, NRA And Others Are Lobbying For Cannabis Banking Reform — Who Knew?
TSYS Responds
TSYS is dismissing the lawsuit as baseless. The company told The Atlanta Journal-Constitution that FP Omni’s lawsuit “is wholly without merit" and insists the company can do nothing to override federal regulations regarding card companies.
“This case, at bottom, is nothing more than an attempt by (FP Omni) to ignore the reality of the payments ecosystem with which it is intimately familiar,” TSYS said in a November court filing, adding that FP Omni knew the risks involved in cannabis payments.
The situation was complicated further when FP Omni implied, according to the outlet, that TSYS, Visa and Mastercard might be preparing their own cannabis-friendly payment systems in time to cash in on a potential federal legalization, which seems to be a move the Biden administration is considering.
"FP Omni not only intends to recover the full value of its lost business – the latest valuation of the company exceeded $500 million," FP Omni’s cofounder and CEO, Joe Radest said in the press release, "but also to pursue evidence that will shed further light on the actions of TSYS and others in shutting down a legal, competitive cannabis payment processing business."
One of the major obstacles facing the cannabis industry has been the lack of access to debit and credit card payments as well as banks and financial institutions, all of which have been off-limits for years.
Possible Change In 2024?
In late August, the Department of Health and Human Services suggested the DEA loosen its strict classification of cannabis. Then in September, the Senate Banking Committee approved the Secure and Fair Enforcement Regulation Banking Act, which, if approved by the House, will enable legal cannabis businesses to access banks and financial institutions like other billion-dollar industries.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.