Coinme Sues Coinstar for Alleged Theft of Crypto Technology, Igniting Intellectual Property Battle
A Seattle-based cryptocurrency startup has initiated legal action against its business partner, alleging the misappropriation of confidential technology to create a competing service. Coinme, which enables customers to purchase and sell cryptocurrency using cash or debit cards, filed a lawsuit in King County Superior Court on October 9th against Bellevue-based Coinstar.
The dispute stems from a partnership that began in 2018, when the companies collaborated to offer bitcoin purchases at Coinstar’s well-known kiosks. According to court documents, Coinme provided proprietary APIs and technical information to facilitate the integration of its services with Coinstar’s machines, with both companies sharing revenue from customer transaction fees.
The lawsuit centers around Coinstar’s subsequent development of CINQ, a new platform that offers similar cryptocurrency purchasing capabilities through both kiosks and a mobile application. Coinme contends that CINQ’s design and functionality bear striking
similarities to its own product, suggesting that Coinstar leveraged Coinme’s proprietary technology and platform architecture in its development.
Legal filings assert that Coinstar’s use of confidential information allowed them to expedite CINQ’s development process, reducing both time and financial investment while achieving superior functionality. The complaint further alleges that Coinstar has begun promoting CINQ more prominently at its kiosks, creating customer confusion and redirecting business away from Coinme’s services.
The impact on Coinme’s operations has been significant, with the company reporting substantial decreases in transaction volumes at Coinstar kiosks beginning in August, coinciding with CINQ’s nationwide deployment. The startup claims these losses are directly attributable to Coinstar’s actions and alleged misuse of intellectual property beyond their agreed-upon terms.
Prior to this dispute, Coinme had established a significant presence across approximately 10,000 Coinstar kiosks nationwide, processing roughly $1 billion in cryptocurrency transactions. The company, founded in 2014, made history by launching the first licensed Bitcoin ATM in the United States and has since grown to handle millions in monthly transactions.
The startup is pursuing legal remedies including compensation for lost business and an injunction to halt Coinstar’s use of the CINQ platform. Currently, both companies maintain cross-promotional presence on their respective websites, though this may change as the legal proceedings advance.
Coinstar, which has operated since 1991 and was previously under Outerwall’s ownership before Apollo Global Management’s 2016 acquisition, has partnered with Zero Hash, another cryptocurrency technology startup, to power the CINQ platform. The company was later separated from Outerwall’s other ventures, Redbox and ecoATM, when Apollo split the business into distinct entities.
When approached for comment, representatives from both Coinme and Coinstar declined to provide statements regarding the ongoing litigation. The case highlights growing tensions in the cryptocurrency services sector, particularly concerning the protection of
intellectual property and the evolution of business partnerships into potential competition.
The lawsuit underscores the challenges faced by technology companies in protecting their innovations while engaging in strategic
partnerships, especially in the rapidly evolving cryptocurrency market. As the legal proceedings unfold, the case may set important precedents for how similar disputes in the digital currency industry are resolved.
