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Police, city staff warn of cryptocurrency kiosk fraud; city plans work session on potential ordinance
Summary
City staff and police described repeated fraud through cash-to-crypto kiosks in Forest Lake and neighboring cities and said they will return to council with proposed actions after additional vetting and consultation.
Amanda, a city staff member, briefed the council on work with the Forest Lake Police Department regarding fraud tied to cryptocurrency kiosks located in the city and said staff and police plan to present proposed responses at a future work session.
Amanda said fraud reports associated with three kiosks in Forest Lake totaled more than $300,000 for 2023 and 2024. She told the council that Woodbury has reported over $6.6 million in similar fraud since 2021 and that many victims are elderly or otherwise vulnerable.
Amanda said the state passed legislation the prior year requiring crypto kiosks to be licensed, but that the law contained immediate workarounds and has not fully protected victims. She described machine mechanics: the kiosks accept cash to purchase cryptocurrency and most Forest Lake machines do not permit cashing out; kiosks commonly include large markups (Amanda cited markups of about 30 percent) that make them poor for legitimate investing and attractive to scammers.
Detective Olstad (Forest Lake Police Department) was cited by staff as conducting investigative work and coordinating with other jurisdictions. Amanda said one kiosk in Cub Foods has not generated complaints and that differences in machine operation or limits may affect fraud exposure. The council discussed possible responses including ordinances that would regulate kiosk operators indirectly, cooperative approaches with neighboring cities and seeking assistance from the Minnesota Department of Commerce and the League of Minnesota Cities.
Amanda said the League had not adopted the issue as a legislative priority and was reluctant to lead, but staff hoped the League could assist with legal defense if the city enacted an ordinance and faced litigation. She said detectives were working on public outreach with partners including AARP and that staff planned a presentation to council within about 30 days after the new city administrator starts to lay out potential local regulatory options and outreach plans.
Council members emphasized concern for victims and asked staff to return with options. No ordinance or regulation was adopted at the meeting; staff and police will continue investigations and coordinate with other agencies.
