Tennessee Moves to Ban Cryptocurrency ATMs Over Fraud Concerns

Tennessee is set to become the second state in the United States to prohibit cryptocurrency ATMs after Governor Bill Lee signed Senate Bill 2251 into law. Beginning July 1, the measure will make it illegal to install, operate, or host virtual currency kiosks anywhere in the state.

Lawmakers and consumer protection advocates say the action is intended to address growing fraud cases linked to the machines, particularly incidents involving older residents who have been persuaded to deposit cash into cryptocurrency accounts controlled by scammers.

The new law establishes a legal framework defining both virtual currency kiosks and the individuals or businesses associated with their operation. Under the legislation, a virtual currency kiosk is an electronic terminal that allows users to exchange virtual currency for cash, bank credit, or other virtual currencies.

The law also outlines who qualifies as a kiosk operator, including owners, managers, operators, and property owners who knowingly permit the machines to be installed on their premises.

New Penalties Take Effect July 1

Once the law takes effect, knowingly installing, operating, or allowing the placement of a virtual currency kiosk in Tennessee will be classified as a Class A misdemeanor. Businesses that continue hosting the machines after the deadline could face criminal charges.

The legislation does not prohibit the use of cryptocurrency itself. Instead, it targets the physical kiosks that have appeared in convenience stores, gas stations, and other public locations.

Fraud Cases Drive Legislative Action

Consumer advocates supporting the measure pointed to financial losses connected to cryptocurrency ATM scams. Philip Gentile of the Tennessee Elder Justice Coalition said approximately $10 million was lost through the machines in Tennessee during 2025.

According to Gentile, scammers often contact victims by phone or text and remain on the line while guiding them through the process. Victims are frequently instructed to withdraw cash from their bank accounts and deposit it into a cryptocurrency kiosk.

Gentile said the funds become difficult to recover once the transaction is completed, creating challenges for victims and investigators alike. He also shared that his own mother avoided falling victim to similar scams after seeking advice following a suspicious message.

Law Enforcement Highlights Investigation Challenges

The Knoxville Police Department said cryptocurrency-related fraud cases are often difficult to investigate because transactions can move through multiple exchanges before reaching their final destination.

Scott Erland, the department’s communications manager, said the layered nature of cryptocurrency transactions creates additional obstacles for investigators trying to trace stolen funds. He added that online fraud schemes continue to change as criminals gain access to more advanced technology.

Related: Minnesota Moves to Ban Crypto ATMs Over Rising Scam Concerns