Why Some US Merchants Are “Restricted” And What It Really Means?
In US payments, not every merchant can swipe cards the same way. Some industries are treated as restricted or “high‑risk” by the banks because they sit at the intersection of regulation, compliance, fraud and reputation.
At eDataPay USA, we work with large sponsor banks and card brands, so we follow strict guidelines on which merchants we can board directly, which need enhanced review, and which are completely off‑limits.
What makes a merchant “restricted” or “high‑risk”?
Banks and processors don’t wake up one day and randomly blacklist industries. There are a few consistent reasons why certain verticals end up on the restricted list:
- Regulatory complexity – The business touches heavily regulated areas like cannabis, gambling, money transmission, healthcare or financial products.
- Federal vs. state conflicts – Activities that are legal in some states but illegal at the federal level, like marijuana, create direct conflicts for card networks and banks.
- Higher fraud and chargeback exposure – Sectors like online dating, supplements, travel, and adult content historically generate more disputes, friendly fraud and refund requests.
- Reputational risk – Even when technically legal, some business models (e.g., certain adult or “wonder drug” offers) carry brand and media risk for banks
- AML / sanctions / KYC concerns – Money service businesses, virtual currency operators, cross‑border schemes, and shell entities pose elevated anti‑money‑laundering and sanctions risks.
The more of these factors a merchant has, the more likely it is to be classified as high‑risk and either restricted or prohibited.
Key US restricted and prohibited categories we deal with
Every bank has its own matrix, but large acquirers like Elavon publish clear “prohibited business” lists that show how conservative mainstream US programs have become
Here are some of the headline sectors our team is asked about most often:
Cannabis, CBD and hemp
- Marijuana businesses – Cultivation, distribution and retail sale of marijuana remain prohibited on most traditional card rails when activity is illegal under any law, including federal law.
- Ancillary cannabis services – Businesses whose primary focus is supplying goods or services into the marijuana industry can be restricted or prohibited, especially when cross‑border into the US.
- CBD and hemp – CBD merchants without proper hemp growing or processing licenses are explicitly prohibited in many bank policies; compliant hemp programs may be possible only with tight licensing, testing and product controls.
Risk drivers: Federal illegality, BSA/AML risk, sanctions exposure, and prior enforcement actions against processors that tried to “recode” cannabis transactions.
Gambling, gaming and sweepstakes
- Unlicensed internet gambling – Under US law (including UIGEA and related statutes), taking card payments for unlawful online gambling is prohibited; banks must screen and block these businesses.
- Casinos, lotteries, sweepstakes – Land‑based casinos, state lotteries and sweepstakes operators sit in a heavy compliance zone and are often handled via specialist gaming programs rather than mainstream retail acquiring.
Risk drivers: Complex licensing, multi‑jurisdiction regulation, high dispute rates, and the need to comply with UIGEA and other federal criminal statutes.
Money services and virtual currency
- Principal money services businesses (MSBs) – Money transmitters, FX dealers, prepaid providers, and issuers of money orders/traveler’s checks are routinely prohibited in standard merchant programs and must be placed into dedicated MSB sponsorship structures.
- Virtual currency operators – Crypto exchanges, virtual currency ATMs, and mining operations are now explicitly listed as prohibited in many bank policies unless under a dedicated crypto/MSB program.
Risk drivers: AML/KYC obligations, sanctions risk, cross‑border flows, pseudonymous value transfer, and evolving regulatory expectations.
Short‑term lending and financial products
- Payday and auto‑title lenders – Businesses primarily engaged in payday advances or title loans are commonly prohibited on mainstream acquiring platforms
- Debt settlement and credit repair – Debt resolution companies and many for‑profit credit repair services are banned or heavily restricted because they intermediate distressed consumers and creditors.
- Certain investment and fund structures – Investor services, unregulated investment clubs, cannabis funds and some life‑settlement funds appear on prohibited grids due to regulatory and reputational risk.
Risk drivers: Consumer‑protection scrutiny, high complaint and chargeback levels, and complex securities and lending regulations
Adult, dating and “sexual encounter” services
- Adult entertainment – Adult video, online adult content, strip clubs, and related services are typically treated as high‑risk; some are outright prohibited in conservative programs.
- Escort / “sexual encounter” firms – Businesses that permit sexual encounters (including certain massage parlors and escort services) are explicitly prohibited.
- Companion and dating services – Many dating/companion services are treated as restricted or high‑risk due to chargebacks, recurring billing and content issues.
Risk drivers: Elevated fraud and disputes, content moderation challenges, and brand/reputational concerns for banks and card networks.
Travel, subscriptions and delayed delivery
- Travel clubs and discount travel – Telemarketing travel services, discount travel clubs and pay‑to‑join membership travel schemes are common entries on prohibited lists.
- Delayed delivery over 12 months – Any merchant taking payments more than a year before delivery is flagged because the cardholder’s chargeback rights outlast the merchant’s ability to perform
- High‑risk recurring and subscription models – Subscription‑heavy models in dating, content, software and supplements are placed into elevated‑risk MCCs with higher scrutiny and pricing.
Risk drivers: Chargeback exposure, bankruptcy/insolvency risk between purchase and delivery, and aggressive sales/telemarketing tactics.
The MCC codes behind high‑risk and restricted merchants
Card networks use Merchant Category Codes (MCCs) to label what a business actually does, and many high‑risk sectors sit in specific MCC ranges that banks monitor more closely.
Here are some of the MCCs that often signal elevated or restricted risk in US acquiring (examples, not a complete list):
- Adult and dating services
- 5813 – Bars, cocktail lounges, discotheques, nightclubs, taverns (including many adult‑oriented venues).
- 5942 – Book stores (used for adult book/video stores in some portfolios).
- 5967 – Direct marketing – inbound/outbound telemarketing for adult and other offers.
- 5969 – Other direct marketing (continuity/subscription models, including some adult services).
- 7273 – Dating and escort services / companion services.
- 7297 – Massage parlors and similar “sexual encounter” businesses.
- Gambling, gaming and lotteries
- 7995 – Betting, including internet gambling when permitted; a key MCC under UIGEA and bank monitoring.
- Money services and FX
- 6051 – Non‑financial institutions – foreign currency, money orders, travelers cheques.
- Investments and financial products
- 6211 – Security brokers/dealers (stocks, bonds, commodities, mutual funds).
- 7399 – Business services not elsewhere classified (often used as a “catch‑all” for investment clubs, for‑profit adoption agencies, debt‑related services, etc.).
- Telemarketing, continuity and direct marketing
- 5962 – Direct marketing – travel‑related arrangements (telemarketing travel, discount clubs).
- 5966 – Direct marketing – outbound telemarketing for “protection” services and similar offers.
- 5969 – Other direct marketing – recurring/subscription and “continuity” products (including wonder‑drug/supplements offers in some programs).
- Tobacco, vape, pharma and supplements
- 5122 – Drugs, drug proprietaries, and druggist sundries wholesalers (used for drug paraphernalia and certain supplement/telemedicine models).
- 5912 – Drug stores and pharmacies (restricted when used for non‑face‑to‑face pharma that does not meet association registration).
- 5993 – Cigar stores and stands (non‑face‑to‑face tobacco and e‑cigarette merchants).
- Travel, airlines and cruise lines (especially for PayFacs)
- 3000–3299 – Airline‑specific MCC range.
- 4511 – Airlines, air carriers (other than chartered/non‑scheduled).
- 4411 – Cruise lines.
- 4722 – Travel agencies and tour operators.
- Other flagged MCCs in prohibited lists
- 5045 – Computers, peripheral equipment and software (used here for game console circumvention devices).
- 7996 – Amusement parks, carnivals, circuses (also used for fortune tellers and mystics in some risk matrices).
- 8999 – Professional services not elsewhere classified (used for penny auctions and other unusual business models).
For merchants, your MCC is not just a label – it drives how banks score your risk, what monitoring applies, and in some cases whether your business is allowed at all.
The practical risks for banks, processors and merchants
When a merchant operates in a restricted vertical, everyone in the chain faces real, measurable risk:
- Higher chargeback ratios and potential fines – Excessive disputes can trigger network monitoring programs, fines and even forced termination.
- Regulatory enforcement – Mis‑coding or disguising prohibited activity (for example, labelling cannabis sales as “pet supplies”) has already led to criminal bank‑fraud prosecutions.
- Account holds and reserve requirements – High‑risk merchants are more likely to see rolling reserves, delayed funding and closer transaction monitoring.
- Portfolio and reputational risk – A single non‑compliant portfolio can damage a bank’s brand and jeopardize BIN sponsorships and schemes approvals.
For merchants, the result is simple: if risk is not managed upfront, you can lose your processing overnight.
How eDataPay approaches restricted merchants
Our job is not just to say “no.” Our job is to separate what is completely prohibited from what can be done with the right structure, licensing and partners.
Here’s how we work with US restricted merchants:
- Clear triage – We use bank‑level prohibited lists (like those of Elavon and other sponsor banks) to quickly identify what we can board directly, what needs high‑risk routing, and what we must decline.
- Licensing and compliance first – For verticals like CBD, MSBs, gaming and healthcare, we start by validating licenses, registrations and compliance programs before we talk about rates.
- Specialized rails and partners – Where mainstream US banks can’t support a model, we explore specialized acquirers, dedicated high‑risk programs or alternative payment methods that are still fully compliant.
- Ongoing monitoring and chargeback control – We treat high‑risk portfolios as a living risk profile, not a “set it and forget it” account. That protects both the merchant and the sponsoring bank.
If your business sits in one of these categories and you’ve been told “you can’t process cards,” there may still be compliant options—provided the structure, licensing and risk controls are right.