Preheat an air fryer to 350 degrees F (175 degrees C) for 5 minutes.
Combine flour, Cheddar cheese, milk, green chile peppers, taco seasoning, garlic powder, cumin, and sugar in a medium bowl. Blend together until a dough forms.
Line the air fryer basket with a parchment paper round. Spray with nonstick cooking spray. Drop dough into the basket using a spring-hinged scoop. Air fry for 12 minutes.
Meanwhile, mix melted butter and taco seasoning mix together for the topping. Separate biscuits and brush with taco-seasoned butter. Serve immediately.