By / January 25, 2024

Uber Fights to Deliver Cannabis to Customers: The Battle for a New Transportation Service Market

Uber Technologies is actively exploring the cannabis delivery in a move to capture a share of the expanding U.S. cannabis market. In doing so, Uber is lobbying for the SAFE Banking Act in the United States, which will allow it to process credit card payments for cannabis.

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Uber to Lobby for SAFE Banking Act

In recent years, the cannabis industry has become one of the fastest-growing sectors of the economy, both globally and domestically. However, despite many countries legalizing or decriminalizing cannabis, numerous obstacles still hinder the full integration of this industry into the traditional financial system.

A primary issue in the United States is the inability to make credit card payments for Indian hemp products due to the federal status of these substances. In this context, Uber Technologies has attempted to address this problem by lobbying for the SAFE Banking Act. Will it succeed in capturing the new market for cannabis delivery to consumers?

Federal Regulations and Payment Processing

The adoption of federal regulations would allow the company to process credit card payments for transactions made in its app. Uber Technologies, a transportation company, is still committed to its long-term plan to deliver cannabis to customers.

The ride-sharing and delivery service company revealed that it is lobbying in the United States for bill S. 2860, the Secure and Fair Enforcement (SAFER) Act, and bill H.R. 2891, the Secure and Fair Enforcement Banking (SAFE) Act of 2023.

Online Shopping and Payment Challenges

Online purchases pose a significant problem for cannabis transactions, as major credit card operators refuse to process transactions related to cannabis products due to their federally illegal status. Many cannabis stores often use a workaround that allows customers to make purchases with a debit card in-store, but card operators claim this is also illegal.

Online applications have an even harder time, as they have no choice but to use card payments for transactions. The adoption of legislation that would allow Uber to handle these transactions would open up the market even before any change in the classification of cannabis.

Uber Eats’ Foray into Cannabis Market

Uber Eats began serving the cannabis market in the Ontario province of Canada in 2021, allowing customers to place cannabis orders through the Uber Eats app. Uber Eats introduced products from the cannabis store Tokyo Smoke into its offerings.

At that time, Uber’s CEO, Dara Khosrowshahi, said on CNBC’s TechCheck that the company could deal with cannabis delivery in the United States when federal regulations allow it. Currently, in the USA, cannabis is illegal at the federal level, although over 20 states have legalized its use for adults.

“When the regulations for cannabis become clear, when federal regulations come into effect, we will definitely consider it,” said Khosrowshahi.

Uber Attempted Similar Move in the Alcohol Industry

Uber attempted similar actions in the alcohol industry, but this attempt ended in failure. The company acquired Drizly for $1.1 billion in 2021 following a surge in demand for alcohol during the pandemic, as people stayed home and wanted to consume alcohol. Last week, Uber announced that it is shutting down Drizly.

“After three years of independent operation of Drizly within the Uber family, we have decided to close this operation and focus on our core strategy of Uber Eats, which is helping consumers get almost anything – from food to groceries and alcohol – all in one app,” said Pierre Dimitri Gore-Coty, Vice President of Delivery, in a statement to The Washington Post.

The Future of Cannabis Industry

As the cannabis industry grows and evolves, new challenges and opportunities will emerge. For companies like Uber Technologies, opening the door for cannabis deliveries could be a step in a new direction that could bring significant revenue growth.

However, this requires a transformation of federal regulations concerning cannabis and related transactions. The adoption of the SAFE Banking Act could be the first step towards this goal. We will be following development of the situation and how Uber and the entire cannabis industry will respond to these challenges in the future.

(Featured image by Elliot Brown (CC BY-SA 2.0) via Flickr)

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