Cashless ATMs Have Grown Into a $7 Billion Marijuana Loophole

The McDonald’s in Great Barrington, Mass., had hired extra employees to keep up with the flow of hungry customers from a marijuana shop nearby. What its managers didn’t realize, on a Saturday afternoon in December, was that the payment processing technology at the dispensary was misidentifying a purchase of pear-flavored THC chews as a withdrawal from an ATM—at the burger joint’s address.

The dispensary, Theory Wellness, didn’t know about the wrong address either. But why did the purchase show up as a cash withdrawal? Theory’s payment machine, which looked to a customer a lot like a card reader at a ...