Mastercard has directed U.S. banks to stop allowing cannabis purchases on its debit cards. The company sent out cease-and-desist letters last week, saying that since the federal government considers cannabis sales illegal, Mastercard will not allow those purchases on its systems.

Medical marijuana is legal in 38 states, several territories, and Washington, D.C. Recreational use for adults is allowed in 23 states, multiple territories, and the nation's capital. But, the federal status of cannabis as a Schedule I drug, alongside substances like heroin and LSD, still hampers the industry. As a result, NBC reports, FDIC-backed banks can't do business with companies in the marijuana space, including dispensaries, growers, and distributors, even when they're operating legally under state law.

With traditional banking services out of reach, many dispensaries have been operating as cash-only businesses. Some have allowed debit card transactions with PINs, but Mastercard's move will limit that option for consumers.

A few states are exploring alternative options for cashless payments, including apps like CanPay, but the cannabis industry still faces challenges without broader changes to federal laws.

The proposed Secure and Fair Enforcement Banking Act (SAFE Act) would allow banks to work with legal weed businesses without fear of federal action. Congress has been evaluating the SAFE Act, but the Justice Department has expressed hesitation, saying the measure could open the door to loopholes in money-laundering laws.