KentuckySB 1892026 Regular SessionSenateWALLET

AN ACT relating to the regulation of digital asset business.

Sponsored By: Steve Rawlings (Republican)

Signed by Governor

Administrative Regulations And ProceedingsBanks And Financial InstitutionsCommerceConsumer ProtectionDigital AssetsEffective Dates, DelayedLicensingPeace Officers And Law EnforcementReports MandatedState Agencies

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Bill Overview

Analyzed Economic Effects

28 provisions identified: 5 benefits, 7 costs, 16 mixed.

Tough penalties and fast shutdowns

The commissioner may deny, suspend, revoke, or restrict licenses for many violations. Civil fines are $1,000 to $5,000 per violation and can run per day; operators may also have to pay the state’s exam and legal costs, and kiosks can be seized or disabled. In emergencies, the commissioner can immediately suspend or condition licenses and order seizure or disable kiosks. The commissioner can issue cease-and-desist orders, settle by consent order, or issue a final order if you miss hearing deadlines. Courts can enforce these actions, and remedies add to other legal tools. Making false required records is a Class D felony; operating without a license is a Class C felony. After a denial you are barred for 1 year; after a first revocation you are barred for 3 years; after a later revocation, the bar is permanent.

Strong anti-fraud rules for crypto kiosks

Kiosk operators must verify a user’s identity before taking payment. They must copy a government ID and collect name, birth date, phone, address, and email. Operators must run blockchain tracing software and block transfers to wallets tied to overseas exchanges not open to U.S. users. They must keep written anti-fraud and anti–money laundering programs that meet Bank Secrecy Act rules and include extra checks for people at risk. Each operator must name a chief compliance officer to run these programs.

Large bonds and net worth rules

Kiosk operators must keep a surety bond of at least $500,000. The commissioner can raise it up to $5,000,000, and you must add the extra amount within 30 days. The bond protects claimants and covers claims for at least five years after a violation or business closure. Operators must also keep at least $500,000 in net worth at all times. The commissioner may issue rules or orders to enforce these financial requirements.

Hold dollar-for-dollar reserves for kiosks

Operators must always hold permissible investments worth at least the total of all outstanding kiosk transactions. Value is measured under standard accounting rules. The commissioner can limit which investments qualify and may allow others by rule or order. If an operator becomes insolvent, these investments are treated as held in trust for customers.

Fraud refunds for kiosk users

If you were tricked into a kiosk transaction, the operator must refund all kiosk charges when you report it within 90 days to the operator and to the department, Attorney General, or law enforcement, and you provide proof such as a police report or sworn statement. If the operator or its agent defrauded you and you provide proof within the statute of limitations (at least one year), the operator must fully refund the transaction. Refunds must be paid in the original currency within 72 hours after you meet the requirements.

Stronger bans on kiosk fraud and lies

The law bans schemes to cheat or mislead people using crypto kiosks. Applicants, operators, and agents must not make false statements in filings or investigations, or fail to account for money tied to kiosk transactions. Agents also must not lie to the operator or to the state regulator. Violations can lead to denial or discipline.

Keep detailed kiosk records in Kentucky

Operators and agents must keep detailed transaction and compliance records in Kentucky. Records include amounts, dates, exchange rates, names, ledgers, bank statements, AML and ID files, policies, and complaint communications. The commissioner sets how long to keep them. Records may be electronic, must be kept separate, and must be accessible within seven business days if stored out of state.

Kiosk license ends if renewal missed

Licensees must pay the annual fee and file the renewal report by December 31 each year. If they miss this, the license expires on January 1. Once expired, you cannot legally operate until you renew and are back in good standing.

More exams and fees for operators

Holding a license means you agree to examinations and investigations, with or without prior notice. After written notice, you must pay reasonable fees to cover routine exam costs. The commissioner may accept independent CPA or other qualified audit reports and use them in examinations.

Tighter rules for kiosk agents and funds

Operators must use written contracts for every agent, ban subagents, and set procedures agents must follow. Agents may act only as the contract allows and must remit funds on time, with a maximum set by the commissioner if issued. Money agents receive (minus fees) is a trust for the operator until remitted, and mixed funds stay impressed with a trust. Agents must report any theft, forgery, or loss of operator or user funds within 24 hours.

How to get a kiosk license

Your application must be complete, in writing under oath, include required documents, show you meet bond and net worth rules, and include a nonrefundable fee. The commissioner reviews a complete filing within 90 days (with possible extension) and may inspect your premises. If you meet all rules and at least one location requirement, you get an unconditional license. The commissioner may offer a conditional license with extra terms, like a higher bond; you have 30 days to accept in writing. Each kiosk location and each agent needs written approval and a nonrefundable fee, which may be waived if filed with your initial license request. You must be in good standing where formed, be registered to do business in Kentucky, and keep a Kentucky registered agent.

Licensing steps, fees, and hearing rights

Applications must include detailed personal, business, legal, and financial information, including a Social Security number and 10‑year histories. You must file and pay a nonrefundable fee for each Kentucky kiosk location and each agent. The commissioner will approve, conditionally approve (you have 30 days to accept), or issue a denial with reasons. Before conditions or denial, you get written notice and a right to a hearing if you request it within 20 days. The commissioner sets application and annual renewal fees by rule based on review and enforcement costs.

Ongoing reports and change of control rules

Applicants and licensees must report major events within 15 business days, like insolvency, government lawsuits, or indictments. Each year, licensees must file an annual renewal report with audited financials, locations, transaction counts and dollar totals, refund stats, and holdings as of Dec 31 and Sept 30. For changes of control, file notices within 15 days of learning and at least 30 days before a proposed change, and apply at least 30 days before with a $100 nonrefundable fee. The commissioner must approve a complete control‑change application if you meet licensing standards, or issue a notice listing unmet requirements. Report agent or responsible person departures within 15 days.

Cities may set stricter kiosk rules

Beginning April 30, 2027, local governments may pass and enforce rules for kiosk businesses that do not directly conflict with state law. Local rules may be stricter than the state law.

More exams and law enforcement help

The commissioner can investigate on complaint or on their own and run routine exams of books and records. The commissioner can subpoena people and records, take testimony under oath, and, where federal law allows, review anti‑money‑laundering records. The department may work with other states and federal agencies and rely on their exams. Anyone can file a complaint about kiosk conduct. Each kiosk must post a law‑enforcement contact, and operators must assist with tracing, comply with subpoenas, and name an investigation contact. Operators and agents must follow all state and federal laws.

More expungement for some felonies

Starting April 30, 2027, certain Class D felony kiosk offenses qualify for vacatur and expungement. You may apply five years after finishing your sentence, probation, or parole, whichever is later. You must pay the filing fee and meet the court standards under Kentucky law.

Hardware wallet sellers must warn buyers

Hardware wallet sellers must tell buyers how to access, back up, and restore the wallet. If the seller does not keep recovery info, the warning must say losing it likely means losing the wallet’s contents. These disclosures must appear during setup, in the product box, and on the seller’s website. They must be clear, easy to read, and easy to download or print.

Consumer law applies to kiosk violations

Starting April 30, 2027, violations by crypto kiosk operators or agents, and violations of the hardware wallet disclosure rule, count as unfair or deceptive acts under Kentucky consumer law. The Attorney General can use consumer protection powers to seek remedies and penalties for these violations.

Kiosk operators need approval to replace leaders

Before adding or replacing a responsible person, a kiosk operator must get the commissioner’s written approval. You must file a complete, sworn application in the required format with all needed documents. The commissioner approves if you still meet all licensing rules; otherwise you get a notice listing what is missing.

Approval needed before selling control

You must give notice and get the commissioner’s written approval before any change of control of a licensed digital‑asset business. Some transfers are exempt, such as limited proxy voting, inheritances, certain court‑appointed roles, and public stock offerings, or as later allowed by rule.

Confidentiality for filings and exam reports

Documents you give the commissioner are confidential, not public records, and do not waive legal privilege. Routine Kentucky exam reports are also confidential. The commissioner and people working under the commissioner cannot be forced to testify about these materials in civil cases. The commissioner may share confidential items with regulators or law enforcement if they keep them confidential.

Banks and governments exempt from kiosk licenses

The United States, states and their agencies, and many banks and affiliates do not need a kiosk license. Service providers working under written agreements for those exempt entities are also exempt. Most private kiosk businesses that are not in these groups still must be licensed and follow the rules.

File through central licensing registry

The commissioner may require you to file applications, reports, and approvals—and pay related fees—through the State Regulatory Registry or a similar system. The commissioner can report violations and enforcement actions to that registry. The law also requires a way for licensees to challenge information entered by the commissioner.

Key terms define who is covered

The law defines terms like operator, agent, user, control person, and other roles. These definitions decide who needs a license, reports, and location or agent approvals.

Yearly fee, report, and late penalty

By December 31 each year, you must pay a nonrefundable renewal fee and file an annual renewal report. If your license expires, you may reinstate it by February 1 by paying the annual fee, filing the report, and paying a civil penalty equal to the annual fee; reinstatement is retroactive to January 1. New licensees not licensed between January 1 and October 31 do not have to file the next year’s renewal report. The commissioner can require special reports at any time, and an executive officer or director must certify each filing as true.

Agency rules due by 2027

By January 1, 2027, the commissioner must issue all rules needed to carry out the new kiosk law.

Fair process before fines and orders

Before adverse actions, cease‑and‑desist orders, or penalties, the commissioner must serve an administrative complaint. You can get a hearing if you file an answer and request within 20 days, and an emergency hearing if you meet emergency filing rules. If your address is not reasonably known, service may be made at the kiosk premises to reach you.

Public lists and reports on kiosk licensing

The commissioner may publish a list of licensees and agents, and aggregate data, plus information on violations and enforcement. The commissioner may also refer apparent violations to other regulators and law enforcement. Each year, the commissioner publishes a public report with application counts, licenses granted or denied, and required fees.

Sponsors & Cosponsors

Sponsor

Steve Rawlings
Republican • Senate

Cosponsors

Robby Mills
Republican • Senate

Roll Call Votes

All Roll Calls

Yes: 156 • No: 7

House vote • 4/1/2026

3rd reading, passed

Yes: 81 • No: 7

Senate vote • 4/1/2026

passed

Yes: 38 • No: 0

Senate vote • 3/2/2026