PIERRE, S.D. (Feb. 25, 2025) – Gov. Larry Rhoden signed a bill into law yesterday banning financial institutions from using credit card codes to track firearm and ammunition purchases. The new law aims to protect privacy and also prevent the keeping of a gun registry.
Sen. Jim Mehlhaff and nine cosponsors filed Senate Bill 81 (SB81). The new law will bar financial institutions operating in the state from requiring “the use of a firearms code in a way that distinguishes a firearms dealer physically located in this state from a general merchandise retailer or a sporting goods retailer located in this state.”
Last month, the Senate passed the bill by a vote of 33-2. The House concurred with a vote of 68-0. With Gov. Rhoden’s signature, it goes into effect on July 1.
The law also prohibits financial institutions from discriminating against a firearms retailer by levying additional fees, denying lawful transactions, or taking any against a customer or merchant intended to suppress “lawful transactions involving firearms.”
Additionally, SB81 will prohibit any South Dakota governmental entity, their employees, or any person other than the owner or owner’s representative, from “knowingly and willfully” keeping “any list, record, or registry of privately owned firearms or the owners of those firearms.”
“South Dakota has seen strong growth of our firearm industry, and this bill will help that continue. I am grateful that both the bankers and the firearm industry came together on this issue,” said Rhoden in a press release on the signing of the measure.
To date, at least 14 states have banned the use of firearms merchant codes.
IMPACT ON FEDERAL PROGRAMS
In response to legislation like SB81, the major credit card payment networks “paused” implementation of the firearms merchant code in March 2023.
In an email to Reuters, a Mastercard representative said such bills would cause “inconsistency” in how the code could be applied by merchants, banks, and payment networks. The more states that ban such codes, the more likely this program gets scrapped permanently.
In July 2024, Visa and Mastercard told USA Today that they were only using the firearms code in the states that require it by law.
Additionally, data collected from this merchant code would almost certainly end up in federal government databases.
In a nutshell, without the code, the feds can’t gather and compile information on firearms purchases. When the state limits surveillance and data collection, it means less information the feds can tap into. This represents a major blow to the surveillance state and a win for privacy.
BACKGROUND
Merchant Category Codes (MCCs) have their roots in the IRS. They were created to classify different types of businesses and to identify the goods and services they sell. This was sold as an improvement for better tax reporting, and is still touted, as CNBC put it, as a tool to help “prevent things ranging from fraud to human trafficking.” But as is so often the case, “it’s for your safety” morphed into “so we can control you.”
In September 2022, the International Standards Organization, based in Switzerland, approved a new merchant category code for firearm and ammunition merchants. Many of the bills passed specifically reference the code “5723.”
In effect, the firearms code is a de facto gun registry.
In the letter to payment card networks, federal lawmakers stated that the new Merchant Category Code for firearms retailers would be “. . .the first step towards facilitating the collection of valuable financial data that could help law enforcement in countering the financing of terrorism efforts,” expressing a clear government expectation that networks will utilize the new Merchant Category Code to conduct mass surveillance of firearms and ammunition purchases in cooperation with law enforcement.
The more states that ban such codes, the more likely this program gets scrapped permanently.
