High-Risk Product Credit Card Processing Regulations Per State – 2025 Breakdown

Navigating the world of credit card processing for high-risk products can feel like trying to solve a complex puzzle.

Products like ingestible CBD, kratom, vaping oils, and other regulated items face strict oversight from banks, card networks, and government agencies. These industries often walk a tightrope, dealing with financial scrutiny, legal restrictions, and evolving compliance demands. Every misstep can lead to delayed approvals, penalties, or even halted operations.

To make things even more complicated, each U.S. state has its own specific rules when it comes to high-risk products. What might be perfectly acceptable in one state could be heavily restricted or outright banned in another. For merchants and processors alike, this maze of state-by-state regulations adds new layers of uncertainty and frustration.

This guide is here to cut through the confusion and provide actionable insights into managing credit card processing for high-risk categories. By focusing on compliance trends at the state level, we’ll help you better understand the regulatory landscape and prepare your business for success.

Important to Note: This guide highlights evolving state-level regulatory trends relevant to high-risk product sales and payment processing. It does not replace professional legal advice.

What Makes a Product “High-Risk”?

Products labeled as high-risk by payment processors face this distinction because of the legal, regulatory, and financial complexities associated with them. Examples include ingestible CBD, Delta 8/10 THC derivatives, smokable hemp flower, HHC, vaping oils, and Kratom.

Why Are These Products Classified as High-Risk?

High-risk products bring unique challenges for processors due to the following factors:

• Regulatory Complexities: Conflicts among federal, state, and local laws make compliance tricky.
• Chargeback Vulnerabilities: Products like Delta 8 often see disputed charges.
• Card Brand Violations: Violating Visa or Mastercard guidelines on restricted products can result in processor penalties or fines.

For these merchants, FTx Card Payments offers innovative credit card processing solutions that make it easier to sell high-risk products. With features like integrated POS systems, transparent pricing, and chargeback protection, FTx Card Payments eliminates much of the uncertainty that often plagues these types of businesses.

Merchant Challenges with High-Risk Payment Processing

Merchants selling these products often face a range of roadblocks when applying for payment processing services. From rejected applications to account terminations, the obstacles stem from compliance oversights, such as inadequate age verification or marketing claims that violate FDA rules.

Common Risk Factors for High-Risk Merchants:

• Missing age verification capabilities on websites.
• Shipping products to restricted locations, including military bases.
• Making false or unverified health claims (e.g., “relieves anxiety”).
• Lack of website security measures like SSL encryption or PCI compliance.
• Unclear product labeling that omits ingredients or THC content percentages.

Why Compliance Matters Even More in 2025

The landscape of high-risk product processing is only becoming more fragmented and challenging:

• State-level variations are increasing. While some states fully permit products like CBD, others ban them outright or impose restrictions, such as age gates. These laws continue to evolve.
• Localized bans and restrictions. From individual towns to entire counties, regional rules add another layer of complexity.
• Higher scrutiny by processors and third-party monitors. Platforms like LegitScript are paying closer attention, making compliance a top priority for merchants.
• Merchants need better visibility. Without clear guidance, businesses risk site shutdowns or rejected payment applications solely for non-compliance.

The Risk for Payment Processors and Merchants

High-risk product merchants face numerous challenges when it comes to credit card processing approval. Processors often flag applications due to regulatory risks, while merchants encounter operational headaches.

Here’s why:

Risks for Processors

Processors deal with some heavy risks when offering services to high-risk merchants. That’s why they’re extra cautious when reviewing applications.

Here’s a closer look:

Chargeback Issues

For processors, chargebacks are like red flags. Products like Delta 8 THC or vaping oils often come with misunderstandings about legality or effectiveness, sparking disputes from customers. These disputes not only cost money but also increase penalties from card networks, potentially leading to account freezes or even termination.

Compliance Headaches

Processors are responsible for keeping their merchants compliant. If a business sells banned substances or sells age-restricted products to minors, processors can face serious blowback. The last thing they want is to jeopardize their partnerships with big card brands.

Card Network Oversight

If a processor works with too many non-compliant merchants, card networks like Visa and Mastercard start paying closer attention. That can lead to stricter rules, higher fees, and even restrictions, putting the processor’s business on the line.

Common Merchant Pitfalls

If you’re a high-risk merchant, you’ll want to steer clear of these common pitfalls. They can disrupt your operations and even threaten your business entirely:

Website Shutdowns & Rejected Applications

Nothing stalls a business like having your website taken offline or your payment processing application rejected. These issues often arise from failing to meet compliance standards, like missing key product details or security measures.

Immediate Account Terminations

When merchants break the rules, processors don’t hesitate to cut ties. Selling restricted products or skipping age verification might seem like minor mistakes, but they can lead to accounts being terminated without warning, halting your payments altogether.

Oversights in Age Verification or Labeling

Overlooking things like age verification or clear product labeling can cost you. Without these safeguards, you risk fines, lawsuits, and a lot of headaches. Plus, it can scare off potential customers.

Key Merchant Risks

No Age Verification

If you sell age-restricted products like vaping supplies or tobacco, proper age verification isn’t optional. It protects your business and ensures you’re following the rules.

Shipping to Restricted Zones

Be mindful of where your products are going! Certain states or areas (like U.S. military bases ) have stricter rules, and accidentally shipping there can lead to serious issues. Use software tools or shipping controls to avoid these zones.

Unapproved Claims

Claims like “cures anxiety” might seem tempting but can land you in hot water with regulators or even the Food and Drug Administration (FDA). Keep your marketing honest, factual, and backed by evidence to stay on the safe side.

Weak Security

No SSL certificate? Not PCI compliant? That’s a major trust breaker for customers and a red flag for processors. Investing in proper security isn’t just a nice-to-have; it’s critical.

Non-Compliant Labels

Your labels must be crystal clear and include all the necessary details, from ingredients to warnings. Transparency isn’t just good for customers; it’s a requirement in regulated industries.

Required Documentation for Processing Approval

Merchants aiming for processing approval must prioritize transparency. While documents required vary by processor, these are the typical compliance essentials:

• Accurate product labels that list all ingredients.
• Website security measures, such as Secure Sockets Layer (SSL) certificates and Payment Card Industry Data Security Standard (PCI-DSS) compliance.
• Attestations of compliance or agreements for specific products.
• Documentation showing the merchant operates within state and local laws.

Processors may also scrutinize businesses where high-risk products make up a large percentage of total sales. Staying proactive about compliance is key.

Processing Compliance Table for High-Risk Products

Navigating state laws can be tricky, as they vary widely even for the same product category.

Below is a simplified table outlining processing compliance trends by product (keep in mind there are local jurisdictions to consider as well)

High-Risk Product Category Analysis

1. Ingestible and Smokeable CBD Products

Overview: Widely used but subject to FDA and state-level scrutiny.

• Generally Legal Across States: Permitted with significant content restrictions.
• Key Considerations:
• Age verification essential.
• Drugs and health claims prohibited.
• Processor Notes: Flagged frequently due to unclear marketing practices.

States Where CBD Products are Completely Legal:

• Alaska
• Arizona
• California
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Illinois
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Missouri
• Montana
• Nevada
• New Jersey
• New Mexico
• New York
• Ohio
• Oregon
• Rhode Island
• Vermont
• Virginia
• Washington

States Where CBD Products are Legal with Conditions:

• Alabama
• Arkansas
• Florida
• Georgia
• Hawaii
• Indiana
• Iowa
• Kentucky
• Louisiana
• Mississippi
• New Hampshire
• North Dakota
• Oklahoma
• Pennsylvania
• South Dakota
• Tennessee
• Texas
• Utah
• West Virginia
• Wisconsin

States that Prohibit CBD Products:

• Idaho
• Kansas
• Nebraska
• North Carolina
• South Carolina
• Wyoming

Information sourced from worldpopulationreview.com check out their interactive map with more detailed information on conditional legality of ingestible CBD products.

2. Delta 8 THC

Overview: Controversial cannabinoid with varying state legality.

• Legal Status: Permitted in some states but heavily regulated.
• Key Considerations:
• Delta 8 THC and Delta 9 THC have different regulatory statuses
• Banned in several states.
• Processor Notes: Often rejected until further clarification on legality.

States Where Delta 8 THC is Legal:

• Alabama
• Florida
• Georgia
• Illinois
• Indiana
• Kansas
• Kentucky
• Maine
• Maryland
• Massachusetts
• Missouri
• Nebraska
• Nevada
• New Jersey
• North Carolina
• Ohio
• Oklahoma
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Texas
• Virginia
• West Virginia
• Wisconsin
• Wyoming

States that Explicitly Prohibit the Sale of Delta 8 THC

• Alaska
• Arizona
• Colorado
• Delaware
• Idaho
• Iowa
• Minnesota
• Montana
• New York
• North Dakota
• Rhode Island
• Utah
• Vermont
• Washington

Arkansas, California and Mississippi are considered gray area states where the sale of delta 8 THC is not explicitly prohibited but not yet made legal either.

3. Delta-9 THC

Overview: Federally legal in trace amounts when derived from hemp; legality varies widely by state.

Legal Status: Legal in some states, fully legal in others, allowed only for medical use in some, and banned in a few.

Key Considerations:

• Laws differ by state—some have added restrictions.
• Edibles may contain effective doses if within federal limits.
• Always check state and local laws before buying or selling.

Processor Notes:

• Generally accepted with proper documentation.
• Extra review needed for restricted or unclear states.
• Must meet federal and local compliance standards.

States Where Delta 9 THC is Legal:

• Alaska
• Arizona
• California
• Colorado
• Connecticut
• Delaware
• District of Columbia
• Florida
• Illinois
• Maine
• Massachusetts
• Michigan
• Montana
• Nevada
• New Jersey
• New Mexico
• New York
• Oregon
• Rhode Island
• Vermont
• Virginia
• Washington

States that Allow Delta 9 for Medicinal Use (with prescription)

• Alabama
• Arkansas
• Hawaii
• Louisiana
• Maryland
• Minnesota
• Missouri
• New Hampshire
• North Dakota
• Ohio
• Oklahoma
• Pennsylvania
• South Dakota
• Utah
• West Virginia

States that Restrict or have Banned the Sale of Delta 9 THC:

• Idaho
• Indiana
• Iowa
• Kansas
• Kentucky
• Nebraska
• South Carolina
• Tennessee
• Texas
• Wisconsin
• Wyoming

4. HHC

Overview: Marketed as an alternative cannabinoid.

• Legal Status: Legality remains unclear in many states.
• Key Considerations:
• Licensing varies by jurisdiction.
• May be restricted in marketing language.
• Processor Notes: Underwriting challenges due to ambiguous regulation.

States where HHC Products are Legal:

• Alabama
• Florida
• Georgia
• Indiana
• Kansas
• Louisiana
• Maine
• Maryland
• Massachusetts
• Michigan
• Minnesota
• Nebraska
• New Jersey
• New Mexico
• North Carolina
• Ohio
• Oregon
• Pennsylvania
• South Carolina
• South Dakota
• Tennessee
• Virginia
• West Virginia

States where HHC Products are Legal with Strict Restrictions:

• Alaska
• Arizona
• California
• Connecticut
• Missouri
• Oklahoma

States where HHC Products are Illegal:

• Colorado
• Idaho
• Mississippi
• Montana
• Nevada
• New York
• North Dakota
• Utah
• Washington

Gray Area States:

• Arkansas
• Delaware
• Hawaii
• Illinois
• Iowa
• Kentucky
• Texas
• Vermont
• Wisconsin
• Wyoming
• New Hampshire
• Rhode Island

5. Vaping Oils, E-Cigs and Vape Pens

Overview: Vaping products remain legal in every state, but many restrict or ban flavored e‑cigarettes and vape oils to curb youth appeal; some also tax e‑cigarettes.

Legal Status: Legal nationwide, with flavored‑product bans or restrictions in several states; no state has an outright ban on all e‑cigarettes or vape oils.

Key Considerations:

• Flavor bans are the most common form of restriction.
• Some states levy special taxes on e‑cigarettes.
• Local (city or county) rules may add further limits or full sales bans.
• Requirements for labeling, packaging, and retail channels vary.

Processor Notes:

• Shipments may be flagged for flavored products in restricted jurisdictions.
• Always verify both state and local rules before listing or shipping.
• Ensure tax compliance where e‑cigarette levies apply.

States with Restrictions or Bans on Flavored Vapes

• California – Bans all flavored e‑cigarette and tobacco products; some cities (e.g., San Francisco) ban all vape sales.
• Massachusetts – Bans all flavored tobacco products; Brookline enforces a generational ban on nicotine/tobacco sales.
• New York – Bans flavored nicotine vapor products and any tobacco/nicotine vapors in pharmacies.
• New Jersey – Bans sale of flavored vapes.
• Rhode Island – Bans sale of flavored vapes.
• Utah – Bans sale of flavored vape products.
• Connecticut – Restricts flavored vape sales.
• Delaware – Restricts flavored vape sales.
• Florida – Restricts flavored vape sales.
• Colorado – Restricts flavored vape sales.
• Montana – Temporarily banned flavored e‑cigarettes (non‑tobacco flavors).
• Washington – Temporarily banned flavored e‑cigarettes (non‑tobacco flavors).

6. Kratom

Overview: Herbal product facing growing state-level bans.

• Legal Status: Prohibited in many states.
• Key Considerations:
• Retailer licensing varies significantly.
• Controversial
• Processor Notes: High levels of rejection during underwriting due to legality concerns.

States Where Kratom Sales are Completely Banned:

• Alabama
• Arkansas
• Indiana
• Rhode Island
• Vermont
• Wisconsin

Note: Every other State should be considered gray area as regulations are quickly changing and regionally specific.

Risks of Non-Compliance

Ignoring regulatory guidelines leads to serious complications for merchants, including, but not limited to:

• Merchant Account Suspension: Terminations halt sales and cash flow.
• Higher Chargeback Rates: Misaligned compliance raises dispute rates.
• Processor Scrutiny: Additional audits and liability monitoring.
• Member Alert to Control High-Risk Merchants (MATCH) List Reporting: Non-compliant merchants risk being flagged permanently.
• Audit Reviews: Compliance platforms may closely examine a merchant’s operations.

Merchant Onboarding Guidance

A few simple measures can make your business compliance-ready for 2025.

• Ensure age verification tools are in place.
• Make labels accurate, clear, and legally compliant.
• Avoid unsubstantiated marketing claims.
• Adhere to SSL certifications and PCI compliance.
• Verify that products are sold only in permitted regions.
• Exclude military bases from shipping zones.

Final Takeaway for Processors and Legal Teams

Credit card processing for high-risk products in 2025 requires attention to detail, documentation, and regulatory alignment. Always verify legal requirements at both the state and local level. Processors should prioritize enhanced due diligence, accurate branding, and comprehensive market awareness to ensure compliance and smooth operations.