ST. LOUIS — A St. Louis-based CBD retailer is fighting credit card company Visa in court, alleging the business has been unfairly blacklisted, according to a lawsuit that moved forward in federal court this week.
The suit was first brought in 2018 by MNG 2005 Inc., parent company of CBD Kratom, which has 40 retail stores across the U.S., including 14 in St. Louis.
The company claims that in March 2018 it contracted with JPMorgan Chase Bank to process credit card payments for online orders, but the company got a warning from a Visa contractor, G2 Web Services, that CBD Kratom was added to a “blacklist” because it was engaging in illegal activity and was part of a law enforcement investigation.
Chase in response shut down the retailer’s account on May 1, 2018, and withheld $66,500 in payments from customers, the suit claims.
The suit alleges Chase also attempted to fine the company $25,000 for violating its merchant agreement.
U.S. District Judge John A. Ross ruled Monday that CBD Kratom could go forward with its claims of unjust enrichment and defamation against Visa.
David Palatnik, president of CBD Kratom, said he was never informed of any police investigation and believes everything he sells is legal.
“We are being targeted,” Palatnik said. “CBD is sold by much larger companies like Amazon and gas station chains and they are still allowed to take credit cards.”
CBD, or cannabidiol, is a cannabis product that doesn’t get users high because it lacks marijuana’s psychoactive compound THC.
CBD derived from hemp became legal after the 2018 Farm Bill as long as retailers follow regulations on how it’s marketed, sold and sourced.
The stores also sell kratom, a supplement made from a plant native to Southeast Asia that produces effects similar to opioids.
The DEA threatened to ban kratom in the U.S. in 2016 but advocates pushed back, arguing a stricter federal definition lacked research and would harm people using it for pain or to reduce dependence on opioids. The DEA currently lists kratom as a “drug of concern” and the FDA last year warned consumers not to use it, though it remains legal.
Locally, St. Charles County last year considered banning the sale of kratom after medical examiners determined three people died in the St. Louis region from too much “mitragynine,” a natural substance derived from the supplement. The county eventually allowed its sale to continue.
Palatnik said CBD retailers have faced similar issues with banks and credit card companies across the county, but thinks he’s been blacklisted because of his businesses’ name and large scale.
“Some people say we should change our name,” he said. “But no, we are proud of what we sell, we shouldn’t have to hide it.”
Attorneys for Visa did not reply to a request for comment but have filed several motions to dismiss the suit.
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