By Devyn Arlasky
Alliance for the Fair Access to Cryptocurrency Terminals v. the State of California, et al., Case No. 23STCP04679 (Cal. Super. Ct.). On August 12, 2024, the Superior Court for Los Angeles County sustained the Department of Financial Protection and Innovation’s (DFPI) demurrer to an action filed by the Alliance for the Fair Access to Cryptocurrency Terminals (the Alliance), an advocacy group that represents companies operating crypto kiosks. In sustaining the demurrer, the court upheld the Digital Financial Assets Law’s (DFAL) regulatory regime for the crypto asset industry in California. More specifically, in sustaining the demurrer, the court upheld the daily transaction limit of $1,000 at crypto kiosks, or “Bitcoin ATMs.”
DFAL, created by AB 39 (Grayson (Chapter 792, Statutes of 2023) and SB 401 (Limon) (Chapter 871, Statutes of 2023), provides DFPI the authority to supervise crypto asset-related companies and regulate crypto kiosks that serve California residents. As part of such supervision and regulation, the DFAL requires that operators of crypto kiosks not accept or dispense more than $1,000 per day to or from a customer at crypto kiosks. DFPI and the legislature contend that this restriction on daily transactions at crypto kiosks operates to prevent fraudulent transactions and protect California consumers.
To challenge the DFAL’s restriction on daily transactions at crypto kiosks, the Alliance filed suit against DFPI and the State of California in January 2024, arguing that the daily transaction limit was unreasonable and exceeded the California legislature’s authority. Between January 2024 and August 2024, the Alliance filed two amended complaints, which DFPI responded to with demurrers. Ultimately, on August 12, 2024, the Superior Court for Los Angeles County rejected the Alliance’s argument and found that the daily transaction limit of $1,000 at crypto kiosks is a reasonable method for preventing fraud. Consequently, the court sustained DFPI’s demurrer to the Alliance’s second amended complaint, upholding the DFAL’s daily transaction limit.
In late September of 2024, the Alliance appealed the court’s decision. In the meantime, DFPI may continue to implement the daily transaction limit outlined in the DFAL, and California customers may only deposit or withdraw $1,000 per day at crypto kiosks.