Square is facing a cease-and-desist order and a huge fine in the state of Illinois, according to a regulatory filing made in January and released today.
Ride-sharing apps have also been hit with cease-and-desist orders and fines by regulators who see them as car services rather than technology through with drivers and riders come to private arrangements.
In Illinois, “transmitting money” requires a license.
Square, founded by Twitter co-founder Jack Dorsey, describes itself as “a merchant payment processor.”
Square provides an attachment for mobile devices that turns them into credit card readers. It charges merchants a monthly flat rate or a small percentage of each transaction.
“Square processes payments you receive from your customers. This means that we collect, analyze and relay information generated in connection with these payments,” the company’s legal fine print says.
“They are a merchant agent in a card-based commerce transaction. They never take possession of funds, but send instruction,” tweeted Thomas Noyes, a former Citi executive.
The state is assessing a fine of $1,000 per transaction plus four times the total amount transacted in each case and $1,000 per day for each day the company has violated the law.
“We’ve been in close contact with the Illinois Division of Financial Institutions for several months and are addressing their concerns,” a Square spokesman told SocialTimes.