(Denver Post file)

Hundreds of ATMs in legal pot shops unplugged

Hundreds of cashless ATM machines located in medical marijuana dispensaries in at least two states — the life-blood of businesses otherwise forced to work in cash — were shut down Wednesday, just days after similar machines were unplugged from recreational shops.

The machines in Colorado and Washington were connected to a network served by MetaBank in South Dakota, which in January warned ATM providers by e-mail that machines located in marijuana shops violated federal banking rules.

But the machines remained unaffected until this week, according to owners of cannabis shops impacted by the turn-off said.

Related: More coverage on banking regulations and marijuana business issues

A spokesman for MetaBank or its parent company, Meta Financial Group, did not immediately respond to requests for comment Thursday. MetaBank’s electronic arm, Meta Payment Systems, is the largest ATM sponsor in the country.

“This isn’t about bank accounts, it’s about a merchant processor who simply decided to stop processing,” said Ean Seeb, co-owner of Denver Relief Center, where cashless machines were deactivated this week.

Seeb said the business was given warning from its merchant provider which supplies the machines that they would be taken offline for recreational sales.

“Then we got word that they were all going down,” Seeb said Thursday.

Cashless ATMs work differently than those that dispense currency, allowing customers to be credited for a transaction directly through a credit or debit card.

Not all shops were affected and those tied to a different bank network were still able to process transactions Thursday.

Year One of recreational marijuana: Bags of cash, bank ploys part of “desperate” strategy — get an inside look at Colorado’s marijuana industry in this series of reports on one of the state’s biggest pot retailers, Medicine Man

MetaBank told providers in January that machines could not be located in marijuana businesses because the sale and consumption of pot and infused products remains illegal under federal laws.

“MetaBank, as a federally chartered bank subject to federal banking regulation, cannot sponsor ATM terminals that are deployed in any business establishment that distributes marijuana,” according to the e-mail.

But the relationship remained quiet and unaffected, mostly because banks rely on ATM providers to monitor and track a machine’s location. ATMs are unregulated in Colorado, so there is no one agency or bank that knows where they all are located.

That changed this week when MetaBank took the machines offline.

Several dispensaries were able to avoid the prohibition by working with neighboring businesses, such as hair salons and book shops, that installed ATM machines.

David Migoya: 303-954-1506, dmigoya@denverpost.com or twitter.com/davidmigoya

This story was first published on DenverPost.com