California DFPI Fines Coinhub $675,000 for Digital Asset Law Violations

Executive Summary

The California Department of Financial Protection and Innovation (DFPI) has issued a substantial fine of $675,000 against LSGT Services, LLC, operating as Coinhub, a Bitcoin ATM operator. This regulatory action targets the company for multiple violations of the state's digital financial asset laws, including overcharging consumers and failing to adhere to transaction limits. The move underscores an escalating regulatory environment for crypto kiosk operators within California.

The Event in Detail

Since January 2024, an investigation by the DFPI found that Coinhub engaged in several practices violating California's Digital Financial Assets Law (DFAL). Specifically, the operator charged California consumers fees and markups significantly exceeding statutory maximums. Additionally, Coinhub accepted cash transactions that surpassed the legal daily limit of $1,000. The company also failed to provide legally mandated disclosures before transactions and omitted critical information from receipts, such as customer names and exchange sources. Of the total $675,000 fine, $105,000 is designated as restitution for California consumers who were overcharged.

Financial Mechanics and Regulatory Precedent

The DFPI's enforcement against Coinhub meticulously deconstructs the financial mechanics of the violations. The fine comprises a penalty for non-compliance and a direct restitution component, highlighting the regulator's intent to compensate affected consumers. The violations regarding excessive fees and the $1,000 daily cash transaction limit are explicit breaches of the regulatory framework established under DFAL and the 2020 California Consumer Financial Protection Law (CCFPL). These laws empower the DFPI with expanded authority, positioning them among the strongest financial regulations in the nation for digital assets. This action represents the fourth such enforcement by the DFPI against a crypto kiosk operator in recent months, demonstrating a sustained regulatory effort.

Market Implications

This enforcement action against Coinhub sends a clear message to other Bitcoin ATM operators regarding compliance with California's digital asset regulations. The increased scrutiny by the DFPI suggests a broader trend towards stricter oversight in the Web3 ecosystem, particularly concerning consumer protection and transparent transaction practices. Operators in California are now under heightened pressure to ensure their fee structures, transaction limits, and disclosure practices align precisely with state law to avoid similar penalties. This could lead to a standardization of operational practices among compliant entities and a potential market exit for those unwilling or unable to meet regulatory demands.

Expert Commentary

DFPI Commissioner KC Mohseni has articulated the department's commitment to robust enforcement, stating:

Crypto kiosk operators in California are on notice that we intend to root out bad actors and scammers who put consumers' hard-earned money at risk.

This statement reinforces the regulatory body's proactive stance on protecting consumers and maintaining the integrity of the digital asset market within the state.

Broader Context

This action is consistent with recent regulatory activities. For example, on June 25, 2025, the DFPI fined Coinme, another crypto kiosk operator, $300,000 for DFAL violations, including $51,700 in restitution. Coinme subsequently agreed to implement measures to prevent future violations. These repeated actions by the DFPI indicate an established pattern of enforcement against digital asset kiosk operators, signaling a sustained commitment to ensuring compliance and consumer safety in this evolving financial sector. The robust nature of California's digital asset laws provides the regulatory framework for these ongoing enforcement efforts.