When Iowa Attorney General Brenna Byrd filed a lawsuit against CoinFlip and Bitcoin Depot earlier this year, there were some astronomical voices calling this push for consumer protection “anti-cryptocurrency.” they are wrong. Cryptocurrency ATMs (physical kiosks where users can purchase cryptocurrencies) have become a means of fraud and need reform.
Law enforcement, regulators, and consumer advocacy groups have all expressed concerns about these machines for years. Brian Schwalb of DC AG sued Athena Bitcoin in September. Pennsylvania AG Dave Sunday warned that BATM is a “magnet for scammers.” Arizona AG Chris Mays even posted “STOP” signs at some crypto ATM locations.
Congressional oversight has also been strengthened. Sen. Cynthia Lummis (R-Wyo.), a longtime Bitcoin supporter, is calling for stronger safeguards. Earlier this year, Senate Judiciary Ranking Member Dick Durbin highlighted the fraud, and a few weeks ago, Sen. Elizabeth Warren criticized crypto ATM operators and suggested that regulatory pressure would increase further.
evidence
The FBI estimates that nationally, Americans lost $240 million to cryptocurrency ATM fraud in the first half of 2025. The Iowa AG’s office contacted the top 50 Bitcoin Depot users in Iowa from 2021 to 2024, with transaction value exceeding $2.4 million. Of the 34 people who responded, all admitted to having been scammed. Similarly, an investigation by the DC Attorney General found that 93% (!) of Athena ATM deposits in the District of Columbia were fraudulent transactions over a five-month period.
The story follows a predictable pattern: romance scams, fake police calls, fake tech support. Fraudsters panic and lure victims to crypto ATMs, where they inject cash and instruct them to transfer the crypto to a wallet operated by the criminals. Employees at convenience stores and smoking areas where kiosks are installed are attempting to intervene, but they need training from ATM companies to do so effectively.
Who are these victims? – In DC, the median age was 71 years old.
Needs more protection
A company’s internal data reveals red flags that the company is systematically ignoring. One elderly Iowa user sent $291,075 using 205 different addresses, only to be terminated when CoinFlip ultimately closed his account to prevent further fraud. According to the Iowa AG’s office, once Bitcoin Depot identifies a suspicious wallet, it simply asks users to provide a different address, making it easy for scammers to continue their operations.
Several former employees of virtual currency ATM companies told CNN that their employers failed to adequately prevent fraud or support victims. One person described the company’s previous ethos as, “If someone is stupid and gets scammed, it’s not my problem.” Another said: “If there was a way to prevent fraud 100%, there’s no way this industry would survive.”
Customer service representatives are trained to direct customers who have been scammed to contact local police, but once the kiosk operator recovers the money, police can do little. CNN reported on an incident in Jasper County, Texas, where sheriff’s deputies sawn open a kiosk to remove cash deposited by a lucky victim.
model is the problem
The louder these companies protest regulations, the more obvious it becomes that something is wrong.
The answer lies in the nature of their business model. They are profiting from every fraudulent transaction and have no desire to change. CoinFlip’s cryptocurrency purchase fee is 21.90% of the total transaction amount. Bitcoin Depot’s terms and conditions state that fees range from 17.3% to 50%. For context, if you buy Bitcoin on Coinbase or a similar reliable exchange, it will typically cost you around 1-4%, depending on the type of payment. According to the Washington, D.C. Attorney General’s Office, Athena charges up to 26% in fees on each transaction.
These companies hide their true fees in the fine print, advertising nominal “service fees” that mimic traditional ATM fees while hiding the high fees that drive their profits. One sneaky way they confuse customers is by charging significantly more than the market price on the day of purchase, while keeping the spread the same. (For example, check Athena’s Terms of Service Section 7.5.)
When Bitcoin Depot’s revenue fell by 25% after California instituted a consumer protection measure that limited daily transactions to $1,000, the company specifically blamed “unfavorable laws” in its earnings report. Let’s think about that admission. Their business model clearly relies on their customers losing well over $1,000 per day.
Crypto ATM operators say they serve the unbanked with respect. State AG litigation data shows otherwise. Could crypto ATMs theoretically operate legally with appropriate safeguards for unbanked people? Maybe. But instead of fighting state law enforcement actions, these companies could start by putting serious fraud prevention measures in place that actually work.
The future depends on trust
Crypto ATM operators must first make all fees on purchases more transparent. Second, additional validation and friction must be imposed on large transactions (or transactions of questionable speed). Third, compliance defenses against customers sending cryptocurrencies to suspicious addresses must be significantly strengthened. Users know, or should know, that in some areas of cryptocurrency, there is no centrally controlled intermediary to police fraudulent activity. Consumers expect more from physical, in-person ATMs operated by commercial companies.
The future of the crypto ATM industry doesn’t have to be exploitative. For the unbanked, there are real opportunities to send money, pay bills, and access stablecoins, but those opportunities depend on gaining trust. It starts with transparency, compliance, and design choices that make fraud more difficult, not easier.
In the meantime, rest assured that lawsuits against crypto ATMs are supported by overwhelming evidence. Brenna Byrd and other leaders working on this issue are not anti-cryptocurrency. They are fraud proof. Attorney General Byrd, in particular, has repeatedly supported critical industries. She joined 18 other state auditing firms to sue the SEC for overstepping its authority and signed key court briefs in industry litigation.
Ultimately, if cryptocurrencies don’t police themselves, regulators will do it for us and paint us all with the same brush. Solving problems is not anti-innovation. That’s the only way to make innovation sustainable.
