A growing number of cities and towns across the United States are choosing to ban Bitcoin ATMs outright, citing concerns about fraud and scams targeting vulnerable residents. While the impulse to protect community members is understandable, these blanket prohibitions are a reactionary overcorrection that punishes millions of legitimate users, conflicts with existing state regulation, and ultimately does little to stop the scammers who will simply redirect victims to other payment methods.
The most significant legal challenge to this trend arrived on December 22, 2025, when Bitcoin Depot, the nation's largest Bitcoin ATM operator, filed a preemption lawsuit against the City of Saint Paul, Minnesota, arguing that the city's total ban on virtual currency kiosks violates state law.
The core question: When a state legislature has created a comprehensive licensing and regulatory framework for Bitcoin ATMs, can individual cities simply ban them entirely? Bitcoin Depot says no — and the legal precedent suggests they may be right.
The Lawsuit: Bitcoin Depot v. City of Saint Paul
Case Information
Bitcoin Depot's complaint makes a straightforward preemption argument: Minnesota's legislature already enacted comprehensive regulation of virtual currency kiosks through Chapter 53B of the Minnesota Statutes, the re-enacted Money Transmission Act. This law, passed in 2023 and further amended in 2024, establishes state-level licensing requirements, fee disclosure rules, consumer protection mandates, and broad regulatory authority for the Minnesota Department of Commerce.
Saint Paul's ordinance (Chapter 297) takes a different approach. Section 297.02 makes it flatly unlawful for any person to "host, allow, operate, permit, locate, or place an operational Virtual Currency Kiosk within the City." Violations can result in administrative citations or criminal prosecution.
The complaint cites established Minnesota Supreme Court precedent: an ordinance conflicts with state law where it "forbids what the statute expressly permits" (Mangold Midwest Co. v. Village of Richfield, 1966), and a municipality "may not prohibit by ordinance conduct that is not prohibited by statute" (State v. Kuhlmun, 2007).
The Growing Wave of Municipal Bans
Saint Paul is not alone. Across the country, a growing number of municipalities have moved to ban or restrict Bitcoin ATMs within their borders:
The pattern is clear: a local scam incident makes headlines, residents and council members react with outrage, and the quickest political response is to ban the machines entirely. It is the path of least resistance, but it is not the right path.
The following sections represent the editorial position of BitcoinATM.news. We believe that while scam prevention is critical, outright municipal bans are the wrong tool for the job and cause more harm than they prevent.
Why Bans Are the Wrong Approach
The industry serves millions of legitimate users
Bitcoin ATMs have been operating in the United States for over a decade. There are roughly 30,000 machines across the country, and the vast majority of transactions are conducted by legitimate users: cash economy workers who lack traditional bank accounts, people sending remittances to family abroad, privacy-conscious consumers, and everyday people who want fast, convenient access to Bitcoin without navigating complex online exchanges.
Banning Bitcoin ATMs to combat scams is analogous to banning wire transfers because some people get tricked into wiring money to scammers, or banning prepaid gift cards because they are frequently used in fraud schemes. The payment method is not the problem. The crime is the problem.
Scammers will simply adapt
If a city removes every Bitcoin ATM, scammers will not stop targeting victims in that city. They will redirect them to wire transfers, gift cards, peer-to-peer payment apps, online cryptocurrency exchanges, or machines in neighboring jurisdictions. The FBI and FTC have documented that scammers routinely shift payment methods based on what is available. Removing one channel does not protect victims; it just changes the script the scammer reads over the phone.
Bans punish the majority for the actions of a few
Every community that has enacted a ban has done so in response to specific scam incidents involving a relatively small number of victims. While every scam loss is a real harm to a real person, the response should be proportionate. Denying an entire city's population access to a legitimate financial service because some residents were victimized by criminals is not proportionate. It is the equivalent of closing all ATMs in town because someone was robbed while using one.
The patchwork problem
When individual cities set their own rules, the result is a patchwork of inconsistent local regulations that makes it impossible for legitimate businesses to operate efficiently. As Bitcoin Depot argues in its complaint, allowing each municipality to independently decide whether Bitcoin ATMs are permitted would "create an unworkable patchwork of municipal regulations that place an unreasonable burden on Minnesota businesses, discourage business investment in Minnesota, and hamper the efficient operation of business."
This is exactly why state legislatures, not city councils, are the appropriate level of government for regulating financial services.
Better Alternatives to Outright Bans
The good news is that effective consumer protection does not require eliminating Bitcoin ATMs. There are multiple approaches that address scam risks while preserving access for legitimate users.
Comprehensive state regulation already exists
Minnesota's Chapter 53B, the framework at the center of the Saint Paul lawsuit, is a model for how states can regulate virtual currency kiosks effectively. The 2024 amendments to this law require:
- Clear and conspicuous disclosure of all material risks associated with virtual currency, displayed on the kiosk screen
- Mandatory 72-hour refund period for transactions involving new customers
- Maximum daily transaction limits of $2,000 per customer
- Detailed recordkeeping requirements (five-year retention)
- State licensing through the Department of Commerce
- Broad administrative authority for the Commissioner to enforce compliance
These are meaningful protections. They cap the amount a scam victim can lose in a single day. They give new users a cooling-off period. They create a paper trail for law enforcement. And they are enforced uniformly across the entire state, not on a city-by-city basis.
Operator-level innovation
Some operators are going beyond regulatory minimums and building real-time scam prevention into their systems. America Bitcoin ATM, for example, recently detailed their approach in a feature published in C-Store Dive, describing a proprietary protocol that detects fraud patterns and intervenes before transactions are completed. The company reports intercepting 95% of reported scam transactions in their most recent quarter and returning an average of more than $5,000 per affected customer.
This kind of innovation — where operators invest in detection, intervention, and 24/7 live support rather than simply processing transactions and collecting fees — is where the industry should be headed. Banning the entire category eliminates the incentive for operators to improve.
Registration and licensing models
For municipalities that want a role in oversight, registration and licensing models offer a middle ground. Forest Lake, Minnesota has considered an approach that would require businesses hosting Bitcoin ATMs to register each machine, pay a fee, and provide written confirmation from police that the operator had no more than two substantiated fraud instances within the city in the past six months. This keeps the machines available while creating accountability and local oversight.
Enhanced consumer education
The most cost-effective scam prevention tool is education. Many scam victims report not knowing that legitimate government agencies and companies never demand payment via Bitcoin ATM. City governments could invest in public awareness campaigns, partner with senior centers and community organizations, and require operators to display clear warning signage — all without removing the machines.
The Preemption Precedent
The outcome of Bitcoin Depot's lawsuit against Saint Paul could have national significance. If the court rules that Minnesota's comprehensive state regulatory framework preempts local bans, it would establish a precedent that other operators could use to challenge similar ordinances across the country.
The legal argument is strong. The Minnesota legislature has clearly acted to create a uniform, statewide framework for regulating virtual currency kiosks. The Department of Commerce has been designated as the sole governing regulatory authority. The statute explicitly permits what Saint Paul's ordinance explicitly prohibits. Under established Minnesota precedent, that conflict should be resolved in favor of state law.
More broadly, this case highlights a fundamental question about how new financial technology should be regulated in the United States. Should every city council in America have the power to decide which financial services its residents can access? Or is that a decision better made by state legislatures that can balance consumer protection with access, enforce standards uniformly, and avoid the chaos of thousands of conflicting local rules?
Our position: We believe the answer is clear. State-level regulation, enhanced by operator innovation and consumer education, is the right framework. Municipal bans are a blunt instrument being used where a scalpel is needed. The Bitcoin ATM industry has been serving communities for over a decade. It is not going away, and it should not go away. The challenge is to make it safer — and that requires smarter regulation, not prohibition.