Kansas committee weighs bill to regulate virtual‑currency kiosks as fraud concerns mount

The Committee on Financial Institutions and Pensions opened a hearing on House Bill 2515, which would add a Virtual Currency Kiosk Consumer Protection Act to the Kansas Money Transmission Act and impose disclosures, licensing and anti‑fraud duties on in‑person cryptocurrency kiosks.

David Weiss of the reviser's staff told the committee the bill defines "virtual currency kiosk" and integrates those devices into the existing money transmission framework, requires operators to retain disclosure records for three years and makes location reports public. "Section three gets into some of the requirements for virtual currency kiosk operators," Weiss said, describing disclosure, recordkeeping and licensing provisions.

Regulators and law‑enforcement witnesses urged passage to protect consumers from a sharp rise in kiosk‑related scams. Brock, general counsel for the Office of the State Bank Commissioner, said kiosks operating today are often treated as two‑party sales and thus exempt from money‑transmitter rules; HB 2515 would remove that exemption and require licensing. "Today virtual currency kiosk operators are currently exempt from money transmission regulation," Brock said, and the change would likely create about "10 to 12 new licensed money transmitters," the OSBC estimated while seeking one fee‑funded examiner to oversee new licensees.

Jake Castillo, First Assistant Attorney General, urged clarifying edits and fee limits, and described the practical limits prosecutors face after large losses. Castillo recounted a case in which an elderly victim deposited more than $300,000 into kiosks in one day and another $150,000 the next day; investigators were "only able to freeze approximately $120,000 of the half million that was sent over," he said, underscoring how quickly funds may move to foreign exchanges and be liquidated.

Industry witnesses broadly supported some protections but warned that strict fee caps or low transaction caps could reduce access and impede investigations. John Turk, director of government affairs for CoinFlip, said his company holds a Kansas money‑transmitter license, uses third‑party ID verification and maintains multiple warning screens. "We always refund the fees to that victim because we don't want to profit off the fraud," Turk said, describing operator responses to documented scam reports.

Mike Geelhart of Bitcoin Depot, a national operator, told the panel his company backs many bill provisions but cautioned that flat fee caps and low new‑customer limits would make it harder for operators to cover compliance, security and armored‑car costs. He also raised concerns that a low per‑transaction cap could encourage "kiosk shopping" that fragments data across operators and makes it harder for law enforcement to track illicit flows.

Several witnesses described why older adults are common victims: scammers create urgency, coach targets to withdraw cash and direct them to kiosks; camera photos often show victims on the phone and under duress. Kelly Vanwell of the Kansas Bankers Association cited federal data and other state reports showing a disproportionate share of kiosk deposits tie to scams and urged the committee to adopt measures that create a "cooling off" period and clearer receipts.

Technical drafting questions drew persistent attention. Castillo and others asked the committee to clarify whether the bill's 14‑day and daily caps apply to the initial transaction or only subsequent transactions, and whether a police report should be required for refunds or whether a consumer's sworn statement would suffice. Committee members and witnesses also debated the interaction with federal suspicious‑activity reporting: FinCEN guidance requires a SAR when a transaction is both suspicious and $2,000 or more; operators and proponents discussed whether lowering state limits below that level could reduce federal reporting that provides law enforcement valuable data.

Law enforcement representatives, including a Sedgwick County investigator joining by WebEx, said the bill's proactive steps—disclosures, printed wallet addresses on receipts, holds and live customer‑service lines—would help officers stop some transactions and trace funds sooner. Kristen, an investigation supervisor, described one incident in which a clerk and a responding officer interrupted a transaction and tried to get the kiosk operator to halt the transfer.

The chair closed the hearing after industry, regulators and advocates presented testimony and questions. The committee accepted written testimony from additional parties and the chair said she "intends to possibly work this bill Monday," signaling the panel may debate amendments to clarify caps, the refund procedure and evidence‑sharing provisions.

What legislators said matters: supporters told the committee HB 2515 aims to reduce rapid losses to scams, especially among older Kansans, while operators said the state should balance consumer protections with practical compliance costs and preserve law enforcement's ability to collect suspicious‑activity data. The committee did not take a vote; next steps include drafting clarifying amendments and scheduling a work session.