California’s Department of Financial Protection and Innovation (DFPI) has fined Bitcoin ATM operator Coinhub $675,000 for violating state digital asset laws. The penalty, which includes $105,000 in restitution for overcharged customers, highlights growing regulatory pressure on the crypto ATM industry.

An investigation found that LSGT Services, LLC, which operates as Coinhub, committed several breaches of the Digital Financial Assets Law (DFAL) since the beginning of 2024. The company allegedly charged markup fees that exceeded legal limits, processed cash transactions above the $1,000 daily cap, and failed to provide mandatory information on its receipts and disclosures.

A Pattern of Enforcement

DFPI Commissioner KC Mohseni issued a stern warning, stating that the agency intends to root out bad actors who put consumers at risk. He clarified that while legitimate operators are welcome, the DFPI won’t tolerate businesses that ignore legal safeguards. This enforcement action is the fourth in recent months targeting crypto ATM companies accused of misleading or overcharging users.

The move against Coinhub is part of a broader push by California to ensure compliance in the crypto sector. Earlier this year, the agency fined another Bitcoin ATM provider, Coinme, $300,000, with over $51,000 designated for customer restitution.

Scrutiny Goes Nationwide

The regulatory focus on crypto ATMs isn’t limited to California. Citing links to scams and illicit activities, city officials in Spokane, Washington, voted to ban Bitcoin ATMs entirely earlier this year. New Zealand took a similar step, banning the machines over rising financial crime concerns.

Law enforcement agencies are also raising alarms about consumer fraud. Police in Massachusetts recently reported two residents lost nearly $7,000 in a “missed jury duty” scam where perpetrators demanded payment through Bitcoin ATMs. The U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN) and the FBI have also issued advisories, noting the role these machines play in scams, especially those targeting the elderly. According to FBI data, Americans over 60 lost nearly $3 billion to crypto-related fraud in 2024 alone.

The Bigger Picture for Crypto ATMs

California’s action against Coinhub underscores a growing concern among regulators about services that expose consumers to significant financial risk. Once viewed as a key bridge to mainstream adoption, crypto ATMs are now under a microscope due to an increasing number of fraud cases and compliance failures.

As state and federal agencies intensify their oversight, operators will likely face stricter rules for Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance. For the industry’s legitimate players, adapting to these new standards will be crucial for maintaining access to one of crypto’s most visible retail channels.