A Georgia-based company that provides payment processing services for cannabis merchants has filed a lawsuit against a subsidiary of Global Payments, a leading financial technology company. The company, FP Omni Technologies, claims that it was misled and breached by TSYS Acquiring Solutions, which failed to deliver on its promises and violated the contract terms.
FP Omni’s Business Model and Contract with TSYS
FP Omni Technologies was founded in 2020 with the aim of offering a compliant and convenient way for cannabis customers to pay for their purchases using debit cards. The company partnered with TSYS Acquiring Solutions, a subsidiary of Global Payments, in 2019 to facilitate the payment processing for its merchants. According to the lawsuit, TSYS represented that it had control over the payment gateway and did not need approval from card networks such as Visa and Mastercard. TSYS also assured FP Omni that it was not bound by any agreements that would interfere with the arrangement, which was supposed to last until October 2024.
FP Omni’s business model was successful and attracted hundreds of cannabis merchants across the U.S. The company claims that its latest valuation exceeded $500 million and that it had plans to expand internationally.
The Dispute and the Lawsuit
The relationship between FP Omni and TSYS soured in 2021, when Visa and Mastercard announced that they would ban all cannabis-related transactions on their networks. This effectively shut down FP Omni’s payment processing services, as most of its transactions were routed through Visa. FP Omni alleges that TSYS failed to inform it of the impending ban and did not take any steps to prevent it. FP Omni also accuses TSYS of falsely representing its ability and authority to provide the contracted services, and of breaching the contract by terminating it without cause or notice.
FP Omni filed a lawsuit against TSYS in February 2022, seeking $500 million in damages for lost profits, goodwill, and reputation. The lawsuit also alleges that TSYS, Visa, and Mastercard conspired to eliminate FP Omni as a competitor and to create their own cannabis-friendly payment system in anticipation of federal legalization.
TSYS has denied the allegations and sought to dismiss the lawsuit, arguing that FP Omni’s claims are baseless and ignore the reality of the payments ecosystem. TSYS contends that it cannot override the federal regulations and the card networks’ policies regarding cannabis transactions, and that FP Omni knew the risks involved in the cannabis industry.
The lawsuit is pending in the Gwinnett County Superior Court, and a trial date has not been set yet.
The Implications and the Future of Cannabis Payments
The lawsuit between FP Omni and TSYS highlights the challenges and uncertainties that cannabis merchants and payment processors face in the U.S., where cannabis remains illegal at the federal level, despite being legalized or decriminalized in many states. The lack of a clear and consistent legal framework creates barriers and risks for the cannabis industry, especially in terms of banking and financial services.
The lawsuit also raises questions about the future of cannabis payments, as the industry awaits the potential federal legalization of cannabis under the Biden administration. Some experts believe that legalization could open the door for more innovation and competition in the cannabis payments space, as well as more consumer choice and convenience. Others are skeptical that legalization would solve all the problems, and that the card networks and the payment processors would still impose restrictions and fees on cannabis transactions.
As the cannabis industry continues to grow and evolve, the demand for reliable and secure payment solutions will also increase. The outcome of the lawsuit between FP Omni and TSYS could have a significant impact on the cannabis payments landscape, and could set a precedent for other similar cases in the future.