Cleaning Up Crypto ATMs Isn’t Anti-Crypto

When the Attorney General of Iowa, Brenna Bird, filed a lawsuit against CoinFlip and Bitcoin Depot before this year, a few astroturfed voices shouted that this consumer protection push was “anti-crypto”. They are wrong. Crypto ATMs – physical kiosks that allow users to buy crypto – have become a vehicle for fraud, and they need reform.

The application of the law, regulatorsand consumer advocates everyone has been raising concerns about these machines for years. DC AG Brian Schwalb sued Athena Bitcoin in September. Pennsylvania AG Dave Sunday has warned that BATM is a “magnet for scammers”. Arizona AG Kris Mayes too display “STOP” signs. in some places encrypted ATM.

Congressional scrutiny is also increasing. Senator Cynthia Lummis (R-WY), a longtime Bitcoin advocate, asked stronger safeguards. At the beginning of this year, Dick Durbin, member of the judiciary classification of the Senate highlighted abuseand a few weeks ago, Senator Elizabeth Warren called out crypto ATM operators, signaling that the regulatory pressure will only intensify.

The evidence

At the country, the FBI estimates that in the first half of 2025 Americans lost $ 240 million to crypto ATM fraud. The Iowa AG’s office contacted the top 50 Bitcoin Depot users in Iowa between 2021 and 2024, representing more than $2.4 million in transactions. Of the 34 who responded, each confirmed that they had been scammed. Likewise, an investigation by the DC Attorney General discovered that 93% (!) of Athena ATM deposits in the District of Columbia during a five-month period were scam transactions.

The stories follow a predictable pattern: romance scams, fake police calls, fake tech support. Scammers play on panic, directing victims to crypto ATMs where they are told to deposit cash and send crypto to wallets run by criminals. Store employees in convenience stores and smoke shops where the kiosks are hosted have tried to intervenebut to do so effectively, they need training from ATM companies.

Who are these victims? – in DC, their median age was 71.

More Protection Needed

Internal data from companies reveals red flags they systematically ignore. A former Iowa user sent $291,075 using 205 separate addresses, only to end up when CoinFlip finally closed his account to prevent another scam. According to the office of the Iowa AG, when Bitcoin Depot identifies suspicious wallets, they only ask users to provide a different address, making it trivially easy for scammers to continue operations.

Several former employees of the ATM crypto company he told CNN that their employers have failed to adequately prevent fraud or assist victims. One described the ethics of his former company as “it’s not my problem if someone is stupid and is scammed.” Another said: “If there was a way to prevent 100% of scams, there is no way this industry would survive.”

Customer service agents are trained to tell scammed customers to contact the local police, but the police can do little to help once the money is collected by the operators from the kiosks. CNN reported a case in Jasper County, Texas, where a sheriff’s deputy appealed open saw a kiosk to recover the money that a lucky victim had right deposited

The model is the problem

The louder these companies protest the regulation, the more it becomes clear that something is wrong.

The answer can be found in the nature of their business models: they profit from every scam transaction and are disincentivized to change. CoinFlip’s the fee for buying crypto is 21.90% of the total amount of the transaction. Bitcoin Depot term list fees between 17.3% and 50%. For context, buying bitcoin on Coinbase or similar reputable exchanges typically costs around 1-4%, depending on the type of payment. According to the DC Attorney General, Athena charges fees of up to 26% per transaction.

These companies bury the real fees in the fine print, advertising a nominal “service fee” that mimics a traditional ATM charge while hiding the hefty commission that drives their profits. A sneaky way they confuse customers is to charge substantially more than the market price on the day of purchase, keeping the spread. (For example, check Athena Terms of Service Section 7.5.)

When Bitcoin Depot’s revenue fell 25% after California enacted consumer protections that limit daily transactions to $1,000, the company explicitly accused “unfavorable legislation“In their earnings report. Think about that admission: their business model apparently depends on customers losing amounts of more than $1,000 per day.

Crypto ATM operators claim to serve the unbanked honorably. Data from state AG cases says otherwise. Could crypto ATMs theoretically operate legitimately with adequate safeguards for the unbanked? Maybe But instead of fighting against the actions of state enforcement, these companies could start to implement serious anti-fraud measures that really work.

The future depends on trust

Crypto ATM operators should first make all fees much more transparent at the time of purchase. Second, they should impose additional verification and friction for large transactions (or those with suspicious speed). Third, they must substantially strengthen compliance defenses against customers sending crypto to suspicious addresses. In some crypto corners, users know or must Know that no central control intermediary is policing for fraud; at a physical in-person ATM controlled by a for-profit company, consumers expect more.

The future of the crypto ATM industry should not be exploited. There are real opportunities in remittances, bill payments and stablecoin access for the unbanked, but these opportunities depend on gaining trust. That starts with transparency, respect and design choices that make fraud harder, not easier.

In the meantime, make sure that the cases against crypto ATMs are supported by overwhelming evidence. Brenna Bird and other leaders working on this issue are not anti-crypto; they are anti-fraud. Attorney General Bird, in particular, has repeatedly supported the industry where it counts: he has joined 18 other state AGs in suing the SEC for exceeding its authority and has signed critical amicus briefs in industry cases.

Ultimately, if crypto doesn’t clean itself up, the regulators will, and they paint us all with the same brush. Cleaning up problems is not anti-innovation; is the only way to make sustainable innovation.