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

15 provisions identified: 5 benefits, 6 costs, 4 mixed.

Big fines, refunds, and kiosk seizures

The commissioner can order refunds for illegal charges and require payment of fees and penalties. Civil penalties are $1,000 to $5,000 per violation and can be charged for each day a violation continues. Orders can also include the state’s exam, investigation, and legal costs, including attorney fees. For operators or agents under penalty, the commissioner can direct officers to seize or disable kiosks.

Stronger financial and agent rules for kiosks

Operators must keep a surety bond of at least $500,000 and a net worth of at least $500,000. The Commissioner can raise the bond up to $5,000,000, and you have 30 days to secure the increase. Each agent must have a written contract, cannot use subagents, and must remit funds promptly; money held (less fees) is a trust for the operator. Agents must report theft, forgery, or loss within 24 hours. Operators must keep detailed books and AML records and make records available within seven business days if stored outside Kentucky.

Tougher enforcement and crimes for kiosk operators

The Commissioner can deny, suspend, revoke, or limit a license for fraud, unsafe or unsound acts, record failures, criminal issues, or other listed grounds. Emergency orders can take effect at once and can disable kiosks, seize equipment, or halt operations. Knowingly filing false required records is a Class D felony, and operating kiosks without a license is a Class C felony. If denied, you are barred for one year; after a first revocation, three years; after later revocations, permanently. Surrendering or letting a license expire does not stop an enforcement case. The Commissioner can issue cease‑and‑desist and consent orders, define unsafe practices, make rules, and require compliance with all state and federal laws.

Fee caps and new-user limits at kiosks

The law caps kiosk fees at the greater of $5 or 18% per transaction. It limits all users to $2,000 per day. For new users (first 30 days), total transactions are capped at $10,500. For new users, the operator must either wait 72 hours to process or let you cancel for a full refund within 72 hours at the operator’s cost.

New expungement path for one felony

People with the Class D felony named in this law can apply in the original court to vacate the judgment and expunge the record under KRS 431.073. You must meet the existing timing, proof, and fee rules in that statute.

Customer funds held in trust

Kiosk operators must keep investments worth at least as much as all outstanding kiosk transactions, measured under GAAP. These assets are held in trust for buyers. This protects your money if an operator becomes insolvent or goes bankrupt.

Fast refunds for fraud victims

If you were tricked into a kiosk transaction, report it within 90 days to the operator and to the Department, the Attorney General, or law enforcement, and submit proof (a police report or sworn statement). The operator must refund you in the original currency within 72 hours after you meet these steps. If the operator or an agent defrauded you, you get a full refund, including fees, when you provide proof within the statute of limitations (not less than one year).

Banks and governments exempt from kiosk license

The United States and its agencies, states and their subdivisions, depository institutions and trust companies, bank holding companies and affiliates, certain foreign banking offices, Edge Act corporations, bank service companies, and examined service providers are exempt from this kiosk licensing law.

Tougher anti-fraud rules for operators

Operators must keep written anti‑fraud and anti‑money‑laundering programs that meet Bank Secrecy Act duties, add enhanced due diligence for at‑risk people, and protect customer data. Each operator must name a qualified chief compliance officer. Operators must use blockchain analytics, block sends to certain overseas exchange wallets, and provide proof of tool use when asked. They must post a dedicated contact for law enforcement and regulators, share tracing results, and follow lawful subpoenas and orders. The law also bans schemes to defraud and other deceptive acts.

License rules for virtual currency kiosks

Running a virtual currency kiosk in Kentucky requires a state license. Each agent and each kiosk location needs written approval and nonrefundable fees. Applications must include detailed business and personal data, including Social Security numbers and audited financials. The Commissioner reviews complete applications within 90 days and may approve, condition, or deny. Licenses renew yearly: pay the fee and file the audited annual report by December 31 or the license expires January 1. You can reinstate before February 1 by filing and paying a penalty equal to the annual fee. Filings may go through the State Regulatory Registry. For ownership changes, file notice within 15 business days and the buyer must apply at least 30 days before closing with a $100 fee. Licensees must stay in good standing and report material changes within 15 business days.

Clear notices, receipts, and ID checks

Before you transact, the operator must show the amount, all fees in dollars, the exchange rate, and key risks, and you must agree. Afterward, you get a paper or electronic receipt with full details, fraud-reporting contacts, and the refund policy in English. Operators must post bold fraud warnings and offer a toll‑free U.S. number during kiosk hours. Before taking payment, the operator must copy your government ID and record your name, birth date, phone, address, and email. You cannot use another person’s identity, and operators face strict liability for breaking the ID rule.

Cities may add stricter kiosk rules

Local governments may pass and enforce rules for virtual currency kiosks that do not directly conflict with state law. Stricter local rules than the state standard are allowed. This means requirements can differ by city or county.

Notice and hearing rights in enforcement

Before putting conditions on or denying a license, the Commissioner must give you written notice. You have 30 days to accept any new license conditions, or the Commissioner can file a complaint. You can request a hearing within 20 days to contest a denial or an administrative complaint. If an emergency order is issued, you are entitled to an emergency hearing if you file on time. The Commissioner must serve a complaint before cease‑and‑desist or penalty orders and at the same time as any emergency order. Notices must be served by certified mail or personal delivery, or to the kiosk premises owner if your address cannot be found.

State sets license formats and fees

The commissioner sets how to format and submit applications, notices, and reports. The rules set nonrefundable application and annual renewal fees that reasonably cover review, investigation, processing, and enforcement. The commissioner can require extra documents and define what must be in location, agent, and change‑of‑control filings.

How exams, complaints, and data are handled

Anyone can file a written complaint about kiosk businesses. The Department can examine firms on‑site or off‑site, issue subpoenas, and use third‑party audits; licensees pay reasonable fees for routine exams and are deemed to consent to exams. Routine exam reports and materials given to the Commissioner are confidential and privileged, and sharing with regulators or law enforcement keeps those protections. Sharing does not waive legal privilege. The Commissioner may publish a list of licensees and agents, aggregate data, and enforcement actions, and must post an annual report with application and licensing counts and fees. These rules increase oversight while protecting sensitive supervisory information.

Sponsors & Cosponsors

Sponsor

Steve Rawlings
Republican • Senate

Cosponsors

Michael Meredith
Republican • House
Robby Mills
Republican • Senate
T.J. Roberts
Republican • House
Tom Smith
Republican • House

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