A CBD retailer that crosses a 1% chargeback ratio can have its funds frozen inside a single billing cycle. Card networks set that threshold low on purpose, and hemp sellers operate close to it by default. Ecommerce chargeback rates rose 222% between the first quarter of 2023 and the same quarter in 2024, and CBD merchants absorbed more of that increase than most retail categories. The fraud behind those numbers takes several forms, and each one has a separate cost. Merchants now spend an average of $110 on each chargeback once fees, labor, and lost product are counted.
CBD and High-Risk Merchant Status
Acquiring banks place CBD businesses in the high-risk category before a single sale happens. The reasons are regulatory uncertainty and a documented history of elevated disputes, made worse by product legality that changes from state to state. That label has a price. High-risk merchants pay processing fees of 4% to 8%, while standard retail pays 2% to 3%, and CBD accounts are commonly charged 4% to 7% per transaction.
The classification also shapes how much scrutiny each transaction receives. Many high-risk processors hold a rolling reserve, withholding a percentage of revenue for months as a buffer against future disputes, which ties up cash a growing brand needs. A frozen reserve or a terminated account follows quickly once dispute volume climbs. The American CBD market is worth roughly $6 billion and is forecast to reach $47 billion by 2027, so the businesses absorbing these costs are not small operations on the margin. For a company already paying premium rates, fraud losses compound a disadvantage it already faces.
Friendly Fraud and First-Party Disputes
The largest single threat is the paying customer who disputes a legitimate purchase. First-party fraud, often called friendly fraud, reached 36% of all reported fraud in 2024, up from 15% the year before. Roughly 1 in 5 consumers admit to filing a dispute on a charge they recognized.
CBD products invite this behavior for specific reasons. Buyers sometimes regret the purchase, misread product effects, or want to avoid the item appearing on a shared statement. The merchant ships a valid order and still loses the sale, the product, and the dispute fee. In 2024, 72% of merchants reported rising friendly fraud, and the category is forecast to grow another 40% by 2026. The figure that should worry owners most is the multiplier behind it. United States merchants lose $4.61 for every $1 of fraud, well above the sticker price of any single order.
Card-Not-Present Exposure
Almost every CBD sale happens online, which places these businesses in the most exposed transaction type. Card-not-present fraud made up 73% of all card payment fraud in the United States in 2024, up from 57% in 2019, and the losses reached nearly $10 billion. Chargeback rates for card-not-present transactions are between 0.6% and 1%, compared with 0.5% when a card is physically present.
The gap matters because CBD merchants have no card-present sales to dilute their ratio. Every order is remote, every order has the higher dispute probability, and the account average reflects that without any offsetting floor of in-person purchases. A retail shop with a physical counter can absorb a bad online week against its in-store volume. A pure ecommerce CBD brand has nowhere to hide the number, so a single fraud cluster moves the whole account ratio.
Shared Risk Across High-Risk Verticals
CBD sellers are not alone in this category, and the patterns repeat across adjacent sectors. An operator selecting an online casino payment gateway faces underwriting that looks much like a CBD merchant’s, because both verticals show high dispute frequency and regulatory variation by jurisdiction. Studying how other high-risk businesses structure their payments gives CBD owners a useful reference point.
The shared lessons are concrete. Tighter identity checks and accurate billing descriptors reduce disputes across gaming, supplements, and the subscription business model alike. A CBD merchant who builds fraud control into normal operations ends up with the same defenses these neighboring industries already rely on.
Account Takeover and Stolen Credentials
Third-party fraud has not disappeared while friendly fraud grew. Criminals use stolen card numbers and hijacked customer accounts, many assembled through credential stuffing, to place orders, then resell the product or abandon it. This category is projected to climb 141%, from $44.3 billion in 2024 to $107 billion by 2029.
For CBD merchants, account takeover is doubly costly. The genuine cardholder files a fraud claim, the merchant eats the chargeback, and the stored payment data that enabled the order may signal weak security to the processor. A pattern of confirmed fraud claims can push an account toward termination faster than friendly disputes, because it points to a problem the merchant appears unable to control. Each compromised account also tends to produce more than one fraudulent order before anyone notices, so the damage rarely stops at a single transaction.
Refund and Promotion Abuse
A quieter form of loss comes from customers who exploit return policies and promotional codes. They claim an order never arrived. Others keep the product and demand a refund anyway, or open multiple accounts to reuse a first-order discount. CBD brands that lean on aggressive coupons to win new buyers expose themselves to this directly, and the cost comes out of margins that are already thin after high-risk processing fees.
The defense is record-keeping and policy design. Tracking delivery confirmation, capping promotional use per customer, and reviewing refund patterns by account turns a soft target into a documented one. Many brands discover the abuse only after a single buyer has cycled through a dozen accounts, so periodic audits of repeat refunders pay for themselves quickly.
Chargeback Thresholds and Account Freezes
The financial damage from fraud is severe, and the structural risk is the loss of the ability to process payments at all. Card networks review accounts that breach the 1% dispute threshold, and high-risk merchants are under that review constantly. A short burst of fraud can carry a CBD account past the line in weeks.
Chargeback fraud is projected to produce $28.1 billion in merchant losses by 2026, and total chargeback costs passed $100 billion in 2025, with 61% tied to friendly fraud. A CBD business that ignores these figures loses revenue on every dispute and spends down the tolerance its processor extends. That tolerance does not refill on its own.
Practical Fraud Defenses for CBD Merchants
The fraud risks facing CBD merchants are predictable, which makes them manageable. Friendly fraud responds to better records and accurate billing descriptors. Address verification and device checks blunt card-not-present exposure, and two-factor authentication at login and checkout closes off most account takeover. None of these defenses removes the high-risk label, and none of them is optional once an account is one bad month away from a freeze.
A CBD owner who tracks dispute ratios weekly, documents every order, and treats the 1% threshold as a hard operating limit keeps the one asset the business cannot easily replace, which is a working payment account. The same owner should expect to defend that account in writing, because high-risk processors ask for evidence before they extend any benefit of the doubt. Delivery records and customer correspondence become the case file that decides if a freeze lifts or holds.
The fraud will keep coming, and the 1% threshold will not bend to make room for it. In a market growing toward $47 billion, the ability to keep taking payments is the one thing a CBD seller cannot afford to lose.
