That's not what he's describing. In this case there actually is no cash or traditional ATM involved on-site. It's connected to the dispensary POS, not a physical ATM. (They often have a regular ATM like you describe also, though.)

So you do an ATM transaction, but the money goes to the dispensary somehow. I do not know how it works on the back end, but I've used it as a customer. It's lovely and can even be done over your phone.

Oh interesting. Does it appear on your end as a cash advance when using a credit card?

Nope. ATM withdrawal. My bank even reimburses the ATM fee associated with it

An ATM withdrawal with a credit card is a cash advance.

Oh my bad, read the question wrong. They just don’t support CCs. Debit only

Isn't that how a traditional ATM transaction works? You use the ATM and the money goes to the ATM owner (plus a fee). The only difference here is you get weed instead of cash.

Except at my dispensary, you can only do transactions in $10 increments. So if you buy $9.95 worth of stuff, you get a nickel back.

Yes, but any ATM tells the bank that you took out $10. The bank never sees the cash and the cash doesn’t belong to the bank. Substituting goods may or may not be allowed but the bank doesn’t know about it and customers are unlikely to complain to the bank.