Cleaning Up Crypto ATMs Isn’t Anti-Crypto

When Iowa Attorney General Brenna Bird filed lawsuits against CoinFlip and Bitcoin Depot earlier this year, a few astroturfed voices cried that this consumer protection push was “anti-crypto.” They’re wrong. Crypto ATMs – physical kiosks that let users buy crypto – have become a vehicle for fraud, and they need reform.

Law enforcement, regulators, and consumer advocates have all raised concerns about these machines for years. DC AG Brian Schwalb sued Athena Bitcoin in September. Pennsylvania AG Dave Sunday has warned that BATMs are a “magnet for scammers.” Arizona AG Kris Mayes even posted “STOP” signs at some crypto ATM locations.

Congressional scrutiny is also increasing. Senator Cynthia Lummis (R-WY), a longtime Bitcoin advocate, has called for stronger safeguards. Earlier this year, Senate Judiciary Ranking Member Dick Durbin highlighted abuses, and a few weeks ago, Senator Elizabeth Warren called out crypto ATM operators, signaling that regulatory pressure will only intensify.

The Evidence

Nationwide, 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, every single one confirmed they had been scammed. Likewise, an investigation by the DC Attorney General uncovered 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, bogus police calls, phony tech support. Scammers play on panic, steering victims to crypto ATMs where they’re told to pour in cash and send crypto to wallets run by criminals. Store clerks at the convenience stores and smoke shops where the kiosks are hosted have tried to intervene, but to do so effectively, they need training from the ATM companies.

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

More Protections Needed

The companies’ internal data reveals red flags they systematically ignore. One elderly Iowa user sent $291,075 using 205 distinct addresses, ending only when CoinFlip finally shut down his account to prevent a further scam. According to the Iowa AG’s office, when Bitcoin Depot identifies suspicious wallets, they simply ask users to provide a different address, making it trivially easy for scammers to continue operations.

Several former crypto ATM company employees told CNN that their employers failed to adequately prevent fraud or assist victims. One described the ethos of his former company as “it’s not my problem if someone is stupid and gets 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 local police, but police can do little to help once the money is collected by operators from the kiosks. CNN flagged one case in Jasper County, Texas, where a sheriff’s deputy resorted to sawing open a kiosk to retrieve the cash one fortunate victim had just deposited.

The Model Is the Problem

The louder these companies protest regulation, the clearer it becomes that something’s off.

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 fee to purchase crypto is 21.90% of the total transaction amount. Bitcoin Depot’s terms list fees between 17.3% and 50%. For context, buying bitcoin on Coinbase or similar reputable exchanges typically costs around 1-4%, depending on payment type. According to the DC Attorney General, Athena charges fees of up to 26% per transaction.

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

When Bitcoin Depot’s revenue dropped 25% after California instituted consumer protections capping daily transactions at $1,000, the company explicitly blamed the “unfavorable legislation” in its earnings report. Think about that admission: their business model apparently depends on customers losing amounts far exceeding $1,000 per day.

Crypto ATM operators say they honorably serve the unbanked. The data from the state AG cases says otherwise. Could crypto ATMs theoretically operate legitimately with proper safeguards for the unbanked? Perhaps. But instead of fighting state enforcement actions, these companies could start by implementing serious anti-fraud measures that actually 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 at suspicious velocity). Third, they should substantially strengthen compliance defenses against customers sending crypto to suspicious addresses. In some corners of crypto, users know or should know that no central controlling intermediary is policing for fraud; at a physical, in-person ATM controlled by a for-profit company, consumers expect more.

The crypto ATM industry’s future doesn’t have to be exploitative. There are real opportunities in remittances, bill pay, and stablecoin access for the unbanked, but those opportunities depend on earning trust. That starts with transparency, compliance, and design choices that make fraud harder, not easier.

In the meantime, rest assured that the cases against crypto ATMs are backed by overwhelming evidence. Brenna Bird and other leaders working on this problem aren’t anti-crypto; they’re anti-fraud. Attorney General Bird, in particular, has repeatedly supported the industry where it counts: she joined 18 other state AGs to sue the SEC for overstepping its authority and has signed on to critical amicus briefs in industry cases.

Ultimately, if crypto doesn’t police itself, regulators will do it for us, and paint us all with the same brush. Cleaning up problems isn’t anti-innovation; it’s the only way to make innovation sustainable.