Custodia Bank's six-year fight for a Federal Reserve master account has reached the U.S. Supreme Court. The Wyoming-chartered special-purpose depository institution filed a petition for certiorari on July 10, 2026, asking the justices to decide whether regional Federal Reserve banks hold unreview...
"We find ourselves on the frontlines of the war against de-banking. Judges have concluded the Federal Reserve is more powerful than one of the U.S. states." — Caitlin Long, CEO, Custodia Bank
Custodia Bank's six-year fight for a Federal Reserve master account has reached the U.S. Supreme Court. The Wyoming-chartered special-purpose depository institution filed a petition for certiorari on July 10, 2026, asking the justices to decide whether regional Federal Reserve banks hold unreviewable discretion to deny payment system access to eligible state-chartered institutions. On August 12, the Blockchain Association filed an amicus brief backing the petition, joined by Senator Cynthia Lummis (R-WY) and former Senator Pat Toomey (R-PA), who filed a separate brief.
The case arrives at a moment of acute contradiction. The same Federal Reserve Bank of Kansas City that denied Custodia's application in January 2023 granted Kraken Financial a limited-purpose master account on March 4, 2026 — the first crypto-native firm in history to receive one. Meanwhile, the Fed's Board of Governors proposed a new "skinny" master account framework in May 2026 that would create an expedited path for nontraditional financial institutions. The divergence between judicial outcomes, regulatory proposals, and selective approvals frames a question the Supreme Court may now be forced to answer: who decides which banks access America's payment rails, and on what authority.
Custodia Bank, formerly Avanti Bank, was founded by Wall Street veteran Caitlin Long after Wyoming enacted special-purpose depository institution (SPDI) legislation in 2019. The bank applied for a Federal Reserve master account in October 2020 — an account that grants direct access to the Fed's payment systems, including Fedwire and FedNow, without reliance on correspondent banking intermediaries.
The Federal Reserve Bank of Kansas City sat on the application for approximately 19 months before formally denying it in January 2023, citing "safety and soundness concerns tied to the bank's digital asset focus."
Custodia sued the Federal Reserve in June 2022, alleging unlawful delay. The case, Custodia Bank, Inc. v. Federal Reserve Board of Governors, et al. (Docket No. 25A1320), has produced the following rulings:
On July 10, 2026, Custodia filed its Supreme Court petition, represented by Davis Polk & Wardwell LLP with Kannon K. Shanmugam — one of the nation's most prominent Supreme Court advocates — as counsel of record. Justice Gorsuch had previously granted a 30-day extension on May 29 to prepare the filing.
The legal dispute centers on a single word in the Depository Institutions Deregulation and Monetary Control Act of 1980. Section 248a(c)(2) states that Federal Reserve services "shall be available" to eligible nonmember depository institutions. Custodia's position is straightforward: "shall" means "must." If Wyoming chartered the bank and it meets eligibility criteria, the Fed is obligated to provide access.
The Tenth Circuit majority disagreed. Judge Ebel's opinion held that Section 248a(c)(2) governs pricing rules — not account access — and applies only to the Fed's Board of Governors, not regional Reserve Banks. The majority pointed instead to Section 342 of the Federal Reserve Act, which grants Reserve Banks discretion to "receive deposits."
Judge Tymkovich's dissent rejected this reading, calling the Monetary Control Act's "shall be available" language "a clear command."
Custodia's petition argues the denial "works a fundamental shift in the balance between state and federal authority over banking" and raises constitutional questions about the appointment and powers of Federal Reserve Bank presidents — unelected officials who, under this reading, hold effectively unreviewable gatekeeping authority over the national payment system.
The Blockchain Association's amicus brief, filed August 12, frames the stakes in blunter terms. The brief states that the Tenth Circuit's ruling "ratifies the Fed's misuse of its payment services to further an impermissible policy goal — debanking the digital-asset industry." It warns the decision creates "a blueprint for federal regulators to debank disfavored industries or companies in the future without interference from state regulators."
Senator Lummis's position is similarly direct: "Wyoming SPDIs have the right to access master accounts. It is past time the Fed follows the laws passed by Congress."
On March 4, 2026, the Federal Reserve Bank of Kansas City — the same regional bank that denied Custodia — approved a limited-purpose master account for Kraken Financial, the Wyoming-chartered banking arm of crypto exchange Kraken. It was the first time in history a cryptocurrency firm received direct access to the central bank's core payment infrastructure.
The approval came with constraints. Kraken's account carries an initial one-year term, includes restrictions and limitations tailored to Kraken Financial's business model and risk profile, does not earn interest on reserves, and does not provide access to the Fed's emergency lending facilities.
The divergence is notable. Both Custodia and Kraken hold Wyoming SPDI charters. Both applied through the Kansas City Fed. One was denied after 19 months of review in 2023. The other was approved in March 2026 — roughly three weeks after the Tenth Circuit closed the door on Custodia's rehearing petition.
The timing raises a question the courts have not addressed: if the statutory framework grants regional Fed banks "essentially unreviewable discretion," as the Tenth Circuit held, what constrains selective application of that discretion?
While Custodia fights for access through the courts, the Federal Reserve Board is building an alternative pathway. On May 20, 2026, the Fed released a formal proposal to create "limited payment master accounts" — what Governor Christopher Waller has termed "skinny" master accounts.
The proposed framework would allow certain financial institutions to open accounts for the limited purpose of clearing and settling payments. Key parameters:
Governor Waller has stated he is aiming for a final rule by the end of 2026. The proposal also directed regional Reserve Banks to pause decisions on new Tier 3 account applications through December 2026 to "promote consistency" before the final framework takes effect.
The proposal has drawn interest from multiple crypto-adjacent firms. Ripple, which received a conditional national trust bank charter from the Office of the Comptroller of the Currency in December 2025, has a pending master account application. With over 300 financial institutions on its network, direct Fed access would allow Ripple to settle through Fedwire and FedNow, eliminating commercial bank intermediaries.
However, the political terrain remains contested. Senator Elizabeth Warren submitted more than 40 amendments to the CLARITY Act, including one that would block the Fed from issuing master accounts to crypto companies.
On May 19, 2026, President Trump signed an executive order directing the Federal Reserve and federal financial regulators to review rules restricting fintech and crypto firms from Reserve Bank payment accounts, with a mandate to decide on completed applications within 90 days.
The Custodia case does not exist in isolation. On December 10, 2025, the Office of the Comptroller of the Currency released findings from its review of the nine largest national banks: JPMorgan Chase, Bank of America, Citibank, Wells Fargo, U.S. Bank, Capital One, PNC, TD Bank, and BMO.
The OCC found that all nine imposed "inappropriate" restrictions on lawful businesses between 2020 and 2023. Digital asset companies were among the industries targeted, alongside oil and gas, firearms, and private prisons. Banks reportedly required escalated approvals or restricted entire sectors, citing conflicts with corporate "values."
Former Senator Pat Toomey provided context during the original district court proceedings: "Custodia should have been granted FDIC insurance, but because the FDIC is politicized and has chosen arbitrarily that they will disfavor this entire sector, that's what's sent us down this path."
The OCC signaled that enforcement options could include fines, consent decrees, or other disciplinary measures. The review was initiated after President Trump signed an executive order directing an examination of whether banks had debanked or discriminated against individuals based on their political or religious beliefs.
For Custodia, the OCC findings add evidentiary weight to the argument that the Kansas City Fed's denial was not an isolated exercise of prudential judgment but part of a broader pattern of institutional hostility toward digital asset businesses. The Blockchain Association's amicus brief explicitly frames the case as "whether federal regulators, based on their own discretionary whims, can intrude on state prerogatives and debank lawful businesses."
The Kansas City Fed must respond to Custodia's certiorari petition by September 11, 2026. If four or more justices vote to grant certiorari, the case would be argued during the Court's next term, with a ruling possible by mid-2027.
Several factors may influence whether the Court takes the case:
If the Court grants review and rules in Custodia's favor, the implications extend well beyond one Wyoming bank. A ruling that "shall be available" imposes a mandatory duty would constrain the Fed's ability to deny master accounts to any eligible state-chartered institution — potentially opening payment system access to dozens of fintech and digital asset firms currently locked out.
If the Court declines the case or affirms the Tenth Circuit, the skinny account framework becomes the primary pathway for nontraditional institutions. That framework, however, offers a diminished form of access — no interest, no lending, no overdrafts — and leaves the underlying discretion question unresolved.
The Custodia case compresses multiple structural tensions in U.S. financial regulation into a single legal question. The tension between state-chartered innovation and federal gatekeeping. The gap between statutory language and administrative practice. The contradiction between one crypto bank's denial and another's approval by the same regional Fed branch.
The Fed's simultaneous pursuit of skinny master accounts suggests the institution recognizes the current framework is untenable. But regulatory proposals can be revised or withdrawn. A Supreme Court ruling cannot. If the justices take the case, the outcome will determine not just Custodia's fate but the structural relationship between state banking charters and federal payment infrastructure — a question with implications measured in trillions of dollars of payment flow.
The Kansas City Fed's response, due September 11, will be the next data point. The Court's decision on whether to hear the case will follow in the months after. Until then, the regulatory landscape for crypto banking remains defined by contradiction: one statute, two interpretations, and two Wyoming banks with opposite outcomes.