Walk into many convenience stores or smoke shops these days, and you might spot a crypto ATM. These machines promise an easy way to buy digital currencies. But a growing chorus of voices, from state attorneys general to seasoned senators, tells a different story. They say these kiosks have become a magnet for scammers, a vehicle for outright fraud.
- Crypto ATMs are increasingly being used by scammers to defraud consumers, with significant financial losses reported by individuals, particularly older Americans.
- The business model of many crypto ATM operators appears to profit from these fraudulent transactions due to high, often hidden fees and a lack of robust anti-fraud measures.
- To foster trust and ensure the long-term viability of the industry, crypto ATM operators must prioritize transparent fees, enhanced verification for suspicious transactions, and stronger defenses against fraud.
Iowa Attorney General Brenna Bird recently filed lawsuits against CoinFlip and Bitcoin Depot. Some quickly cried foul, calling her actions “anti-crypto.” That’s simply not the case. This push for consumer protection is about cleaning up a problem, not stifling innovation.
Law enforcement, regulators, and consumer advocates have all raised red flags for years. DC Attorney General Brian Schwalb sued Athena Bitcoin. Pennsylvania AG Dave Sunday warned his residents about these machines. Arizona AG Kris Mayes even put “STOP” signs at some crypto ATM locations. It’s a clear signal something is wrong.
Even in Congress, the concern is growing. Senator Cynthia Lummis, a known Bitcoin supporter, wants stronger safeguards. Senator Dick Durbin highlighted abuses against older Americans. Just weeks ago, Senator Elizabeth Warren called out crypto ATM operators. The message is clear: pressure will only build.
A Closer Look at the Damage
The numbers are stark. The FBI estimates Americans lost $240 million to crypto ATM fraud in the first half of 2025. Think about that figure. It represents real people, real savings, vanishing into thin air.
The Iowa AG’s office contacted the top 50 Bitcoin Depot users in Iowa from 2021 to 2024. These users represented over $2.4 million in transactions. Of the 34 who responded, every single one confirmed they had been scammed. Every single one.
In Washington, DC, an investigation by the Attorney General found something similar. During a five-month period, 93% of Athena ATM deposits were scam transactions. The median age of these victims was 71. It paints a picture of vulnerability, not tech-savvy trading.
The scam stories are sadly familiar. Romance scams, fake police calls, phony tech support. Scammers create panic, then direct victims to these ATMs. They tell people to feed in cash and send crypto to wallets controlled by criminals. Store clerks have tried to intervene, but they need proper training from the ATM companies to do it effectively.
When the Model Itself Is the Problem
The companies’ internal data often shows clear red flags. But these flags are ignored. Consider one elderly Iowa user. He sent $291,075 using 205 different addresses. CoinFlip only shut down his account after he had lost a staggering sum. Bitcoin Depot, when it spots suspicious wallets, simply tells users to provide a different address. This makes it easy for scammers to keep going.
Former employees of crypto ATM companies have spoken out. They told CNN their employers did little to stop fraud or help victims. One person described the company’s feeling 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.” These statements are troubling.
Customer service agents are trained to tell scammed customers to call the local police. But once the money is collected from the kiosks, police often have few options. There was one case in Jasper County, Texas, where a sheriff’s deputy took drastic action. He resorted to sawing open a kiosk to get cash a fortunate victim had just deposited. It shows the desperation involved.
The louder these companies protest regulation, the more obvious the core issue becomes. Their business model seems to profit from every scam transaction. This gives them little reason to change things.
Let’s look at the fees. CoinFlip charges 21.90% to buy crypto. Bitcoin Depot’s fees range from 17.3% to 50%. Compare this to buying Bitcoin on a reputable exchange like Coinbase. There, fees are typically 1-4%. Athena in DC charges up to 26% per transaction. These are not minor differences.
These companies often hide the true fees. They advertise a small “service fee” that looks like a regular ATM charge. But the real, hefty commission that drives their profits is buried in the fine print. They also confuse customers by charging much more than the market price on the day of purchase. They keep the difference, often called the spread. Athena’s Terms of Service, Section 7.5, offers a glimpse into this practice.
Bitcoin Depot’s revenue dropped 25% after California put in consumer protections. These rules capped daily transactions at $1,000. The company blamed “unfavorable legislation” in its earnings report. This is a telling admission. It suggests their business model relies on customers losing amounts far greater than $1,000 each day.
Crypto ATM operators often claim they serve the unbanked. But the data from these state AG cases tells a different story. Could crypto ATMs operate legitimately with proper safeguards for the unbanked? Perhaps. But instead of fighting state actions, these companies should implement serious anti-fraud measures that actually work.
Building Trust for a Sustainable Future
The path forward is clear. First, crypto ATM operators must make all fees transparent. This means showing them clearly at the time of purchase. Second, they should add more verification and friction for large transactions. This also applies to transactions that show suspicious speed or patterns.
Third, they need to strengthen their defenses against customers sending crypto to suspicious addresses. In some parts of crypto, users know there’s no central party policing for fraud. But at a physical, in-person ATM run by a company, consumers expect more protection.
The crypto ATM industry doesn’t have to be exploitative. There are real chances for good. Think about remittances, paying bills, and giving the unbanked access to stablecoins. But these opportunities depend on earning trust. That starts with clear information, strong compliance, and design choices that make fraud harder, not easier.
Rest assured, the cases against crypto ATMs have strong evidence. Brenna Bird and other leaders working on this problem are not anti-crypto. They are anti-fraud. Attorney General Bird has even supported the industry where it matters. She joined 18 other state AGs to sue the SEC for overstepping its authority. She has also signed critical legal briefs in industry cases.
Ultimately, if crypto does not police itself, regulators will step in. They will paint everyone with the same brush. Cleaning up problems is not anti-innovation. It is the only way to make innovation last.
