Moriarty says kiosks fuel fraud as industry pushes regulation instead of prohibition

State lawmakers on Monday advanced legislation banning cryptocurrency ATMs throughout New Jersey, with the bill’s main sponsor arguing the machines are gateways for fraud and other scams.

The bill, S-2141, unanimously cleared the state Senate Commerce Committee after about an hour of testimony. It now heads to the full chamber for consideration.

Sen. Paul Moriarty, the Gloucester County Democrat who first proposed the measure in 2024, told the committee before the vote that crypto ATMs have “no legitimate purpose — none.”

“They are high-tech machines that facilitate fraud, scams, and other illegal activities,” Moriarty said of the kiosks, often found in bodegas, gas stations, or other public spots. “And the owners of these networks take a big cut of the illicit proceedings. They may not be the scammers, but they’re the middlemen taking a big cut and making it happen.”

The kiosks, which have been on the state’s radar for several years, have become a major tool for predators who pose as members of the government, banks, businesses, or law enforcement to convince their marks to send them digital payments.

Five years ago, the New Jersey Commission of Investigation proposed strict rules for the machines. But Moriarty has said that’s not enough, and his measure would be a forceful attempt to rein in the freewheeling crypto market.

The easy-to-use ATMs let users pay a hefty fee to exchange cash for tough-to-trace crypto coins. The coins are then stored in the person’s digital wallet and accessed with a code the machine spits out, the commission’s report said.

But the fly-by-night operations have proven to be a magnet for corruption. As proof, Moriarty cited statistics from the Internet Crime Complaint Center showing there were 13,400 complaints last year about scams associated with the ATMs.

The nationwide losses from these scams topped $388 million, Moriarty said, a 58% increase over the year before. In New Jersey, there were 369 victims who lost about $18 million, he added.

Most complaints involved people older than 50. Seniors are three times more likely to report losing money than young adults.

“That’s just what was reported,” the senator added. “Often, people don’t report this [because] they’re so embarrassed that they’ve been taken … It leads to some really dire consequences in their life, both financially and mentally.”

Although supporters, including Consumer Reports and the American Association of Retired Persons, backed the measure, not everyone was on board with a ban.

Larry Lipka, general counsel for CoinFlip, the world’s largest crypto kiosk operator, said the company has more than 23,000 customers in the Garden State, and the overall scam rate is less than 1%.

“It belies logic to say that all 23,000 are scam victims or money launderers,” he said. “We’re all here for the same thing: We want to protect consumers. However, we don’t think a ban is the way to do it.”

Instead, Lipka suggested a regulatory bill forcing all crypto operators to take the same anti-fraud measures, such as transaction monitoring, consumer protection holds, and the use of blockchain analytics, that CoinFlip employs.

He also said the company would be willing to refund the full amount to scam victims if lawmakers chose to enact such a law.

“We invest very heavily in compliance and consumer protection,” Lipka said. “We spend millions of dollars a year on tools to prevent scams, we have dozens of employees involved in it, and we have 24-hour customer service.”

He added that company representatives often stop potential victims who call the help number and mention common scams, such as telling someone they need to pay a fine to clear a warrant.

“That is horrible,” Lipka said. “We don’t want that to happen.”

Lipka’s testimony didn’t sway the committee, however, as all five members voted to advance it to the wider chamber.

A similar bill in the General Assembly has been referred to that chamber’s Science, Innovation and Technology Committee.