Executive Summary
The CBD market sits at the intersection of high demand, regulatory complexity, and elevated fraud risk, resulting in unique CBD fraud trends. While consumer interest continues to grow, CBD merchants consistently face higher rates of payment fraud, friendly fraud, refund abuse, and chargebacks compared to many other ecommerce verticals.
This refresh examines the most common fraud trends affecting the CBD market today, why CBD transactions are considered high-risk by payment networks, and how merchants can protect revenue without sacrificing growth or compliance.
Why the CBD Market Is a High-Risk Fraud Vertical
CBD ecommerce combines several risk factors that fraudsters actively exploit:
- inconsistent global and state-level regulations
- higher chargeback scrutiny from processors
- limited payment processing options
- strong resale demand for certain CBD products
- customer confusion around legality, shipping, and effects
Payment networks and processors often classify CBD merchants as high-risk due to regulatory uncertainty and dispute volume. Visa and other networks outline heightened monitoring expectations for high-risk categories in their merchant risk and dispute guidance, such as Visa’s overview of high-risk merchant dispute management.
Common Fraud Trends in the CBD Market
Card-not-present fraud
CBD products are frequently targeted using stolen card credentials. Fraudsters favor CBD merchants because:
- approval rates can vary widely
- processors may already expect higher risk
- some merchants overcorrect by loosening controls
This often results in delayed losses that surface as chargebacks weeks later. For foundational context, see card-not-present fraud and the broader overview of ecommerce fraud and fraud detection.
Friendly fraud and buyer confusion
Friendly fraud is especially common in the CBD market due to:
- misunderstanding of product effects
- confusion about legality or shipping restrictions
- billing descriptor ambiguity
- delayed or seized shipments
These disputes frequently appear as “fraud” chargebacks even when the transaction was authorized. For definitions and impact, see friendly fraud.
Refund and return abuse
CBD merchants often adopt lenient refund policies to reduce disputes. Fraudsters exploit this by:
- claiming dissatisfaction without returning products
- requesting refunds after partial use
- escalating to disputes when refunds are denied
These patterns overlap directly with refund abuse and can quickly inflate dispute ratios.
Shipping and delivery disputes
CBD shipments are more likely to experience:
- carrier delays
- cross-border restrictions
- customs holds or seizures
These issues often lead to item-not-received claims and disputes, even when merchants are not at fault. For related patterns, see Item Not Received (INR).
Regulatory Uncertainty and Its Impact on Fraud
Regulatory ambiguity increases fraud risk indirectly.
In the United States, the FDA continues to evaluate CBD product claims and labeling, creating uncertainty for merchants and consumers alike. The FDA outlines its current position in its FDA consumer update on CBD.
When consumers are unsure whether products are legal, safe, or permitted in their state, they are more likely to dispute charges rather than contact merchants directly.
Why Chargebacks Are Especially Dangerous for CBD Merchants
CBD merchants operate with tighter thresholds and less margin for error.
High chargeback ratios can result in:
- higher processing fees
- reserve requirements
- account termination
- loss of payment processing entirely
For foundational understanding, see Chargebacks 101: What They Are and Why They Matter and the shocking true cost of chargebacks.
How CBD Merchants Can Reduce Fraud Risk
Use precise, risk-based fraud controls
CBD merchants must balance protection with approval rates. Overly aggressive rules increase false declines and suppress growth.
False declines are often more costly than fraud itself. For data-driven analysis, see the value of false declines.
Monitor post-purchase behavior, not just checkout
Many CBD losses occur after checkout through:
- refund abuse
- delivery disputes
- repeat disputers
Connecting approvals to downstream outcomes helps identify repeat abuse before it escalates.
This lifecycle-based approach is central to the unified strategy described in the NoFraud + Yofi platform.
Improve transparency and customer communication
Clear messaging around:
- product expectations
- shipping timelines
- legality disclaimers
- refund policies
reduces confusion-driven disputes and friendly fraud.
Align fraud, CX, and compliance teams
CBD fraud prevention cannot live in a silo. Merchants that coordinate fraud, customer support, and compliance teams resolve issues before customers escalate to banks.
Frequently Asked Questions
Why is the CBD market considered high-risk for fraud?
Regulatory uncertainty, higher dispute rates, and limited payment options make CBD merchants more vulnerable to fraud and chargebacks.
What types of fraud are most common in CBD ecommerce?
Card-not-present fraud, friendly fraud, refund abuse, and delivery-related disputes are the most common.
Can CBD merchants reduce fraud without hurting conversion?
Yes. Risk-based decisioning and post-purchase monitoring reduce fraud while preserving legitimate approvals.
Are chargebacks more dangerous for CBD merchants?
Yes. CBD merchants typically face stricter processor thresholds, making dispute control critical for account stability.
Summary
Fraud trends in the CBD market are driven as much by regulatory complexity and customer confusion as by criminal activity. Merchants that rely solely on checkout screening often miss the behaviors that cause the most damage weeks later.
The most resilient CBD merchants combine precise fraud controls, post-purchase intelligence, and clear customer communication to reduce disputes, protect processing relationships, and grow safely in a high-risk environment.
