Square is pulling out of the hemp and CBD market, giving affected merchants until November 5, 2026 to find new payment processing solutions. The move compounds challenges for retailers already dealing with shifting federal regulations around hemp-derived products.
The payment giant has begun notifying hemp-focused businesses that their accounts will be terminated, according to Cova Software, a cannabis point-of-sale provider that is positioning itself as an alternative for displaced merchants. The two-year runway gives businesses time to transition, but industry observers say the exit signals broader uncertainty in the hemp payment processing space.
Square's departure comes as hemp retailers face mounting regulatory pressure. The Farm Bill's future remains unclear, and the DEA has proposed rules that could dramatically reshape what products are legal to sell. For businesses built on thin margins, losing a payment processor adds operational complexity at the worst possible time.
Why Payment Processing Matters
Payment processing has long been the Achilles heel of cannabis-adjacent businesses. Even though the 2018 Farm Bill legalized hemp with less than 0.3% THC, many mainstream financial services providers remain skittish about the sector. Banks and payment processors worry about regulatory risk, even for federally legal hemp products.
Square's exit leaves a gap in the market. The company's user-friendly interface and competitive rates made it popular with smaller hemp and CBD retailers who couldn't access traditional merchant services. Now those businesses must find alternatives that understand the industry's unique compliance requirements.
Cova Software is making its pitch to fill that void. The Vancouver-based company has spent years building POS systems specifically for regulated cannabis markets in the U.S. and Canada. Unlike general-purpose payment providers, Cova's systems are designed around age verification, inventory tracking, and compliance reporting that cannabis and hemp retailers need.
The Broader Context
The timing is particularly challenging. Hemp retailers are watching closely as the DEA moves forward with interim final rules on hemp products. Some states have already banned or restricted certain hemp-derived cannabinoids like delta-8 THC and THCA, creating a patchwork of regulations that vary wildly by jurisdiction.
Payment processing instability adds another layer of risk. Retailers need systems that can adapt quickly to changing rules, track product compliance by state, and generate the detailed records regulators demand. A POS system built for general retail often can't handle those requirements.
For Cova, Square's exit represents an opportunity. The company is emphasizing its track record in regulated markets and its commitment to staying in the space long-term. But the real test will be whether displaced Square merchants can afford the transition. Purpose-built cannabis POS systems typically cost more than general retail solutions, and smaller operators may struggle with the switch.
What Retailers Should Do
Businesses affected by Square's exit have nearly two years to prepare, but industry consultants recommend starting the search for alternatives immediately. Vetting payment processors and POS providers takes time, and retailers will need to ensure new systems integrate with their existing inventory management and accounting software.
The key questions: Does the provider understand hemp and CBD regulations? Will they stay in the market if rules change? And can they scale as the business grows?
For now, hemp retailers are learning the same lesson that cannabis businesses learned years ago: in a federally complicated industry, having partners who specialize in the space isn't just convenient. It's essential.
This article is based on original reporting by ganjapreneur.com.
