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Financial Implications of Unfair Competition

Major lawsuits like those between Eaze and DionyMed reveal the consequences cannabis business stand to face when they use workarounds such as gift cards, debit cards, and credit cards to process payments. This article will provides insights on how these noncompliant cash alternatives aren't working. Proof of this is becoming increasingly clear as we watch large and small companies in the cannabis industry face bankrupting consequences.

A lawsuit filed in June 4, 2019 by Herban Industries CA LLC (“Herban”) a subsidiary of DionyMed alleges that Eaze knowingly selected U.K.- and Cyprus-based shell corporations to process illegitimate transactions that do not meet regulatory compliance requirements. DionyMed is a Canada-based competitor that, like Eaze, runs a delivery platform in California. These al- legations state the shell companies mislabeled cannabis transactions with product categories such as dog toys, carbonated drinks, face creams, drone components, and dive gear.

Eaze claims that it doesn’t process transactions and only recommends third parties for transaction processing. This is one of the many activities Eaze states that it mediates for the fulfillment of cannabis delivery orders. For instance, Eaze doesn’t hire drivers. Instead, it has acted as a middleman that connects customers with dispensaries, allowing both parties to work out other details such as how transactions are processed and how drivers are recruited.

On July 5, 2019, Eaze filed a countersuit, alleging that DionyMed’s lawsuit was intentionally timed to disrupt Eaze’s 4th of July orders to disrupt the flow of transactions through the Eaze platform, creating a competitive advantage. Eaze also asked the court to dismiss the complaint since they had eliminated all non-compliant payment options immediately following the Heban’s initial complaint unwarranted.

On September 10, 2019, the San Francisco superior court denied Eaze’s motions, rejecting all of Eaze’s arguments. As a result, Herban will now have the

opportunity to conduct discovery into Eaze’s alleged credit and debit card fraud and bring the matter to trial.

Eaze’s alleged decision to terminate online card payments and cease working with EU Processing shortly after our complaint was filed is a powerful admission of guilt and an acknowledgment that the allegations in our complaint are true,” said DionyMed CEO Edward Fields.

These pending lawsuits and conflicting allegations make it unclear whether this is simply a case of one competitor creating a profitable distraction, a sincere attempt to create a level playing field, or another truth that sits some- where else along the spectrum.

Either way, the current wild-west nature of this industry makes it essential that cannabis businesses and customers only use or associate with entirely legal and compliant payment processing solutions like Alt Thirty Six.

At Alt Thirty Six, we’re always staying ahead of the latest regulatory changes and creating cutting edge compliance solutions for cannabis operators. According to our expert advisors and legal teams, any digital transaction that isn’t processed by Alt Thirty Six uses a workaround such as gift cards, debit cards, and credit cards that isn’t fully compliant.

As we enter the golden age of cannabis investing that Danny Moses spoke of, regulatory enforcement will continue to stunt growth for seemingly un- touchable companies like Eaze.

Alt Thirty Six welcomes anyone who wants to be a part of the legitimization and normalization of the cannabis space to register for an account. There's nothing to lose and everything to gain. Cannabis customers avoid burdensome ATM fees and long lines, while merchants experience an immediate and sizable revenue boost with every customer that uses Alt Thirty Six. Click To Tweet

Click the link below to download Alt Thirty Six's e-book titled "Financial Compliance in 2020: Lessons from Last Year" to learn more helpful insights and tips that'll ensure your cannabis business remains fully compliant while keeping operations profitable and streamlined.

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