A six-year legal battle over whether the Federal Reserve can effectively lock crypto-focused banks out of the U.S. payment system has reached the Supreme Court — and the industry’s leading lobbying group is now formally on record demanding that the justices intervene.
The Blockchain Association filed an amicus brief on Wednesday in support of Custodia Bank‘s petition asking the Supreme Court to review a long-running dispute over access to a Fed master account — the gateway credential that gives financial institutions direct entry to the central bank’s payment rails. Without it, banks serving digital asset clients are forced to settle transactions through intermediaries, a structural disadvantage that the industry group says amounts to regulatory exclusion by administrative fiat.
“No lawful industry should be excluded from essential banking services through regulatory pressure or unchecked administrative discretion,” the Blockchain Association wrote in a thread posted to X alongside the filing, adding that the case is fundamentally about ensuring “lawful digital asset businesses can compete on equal footing.”
The association’s brief also warned that lower-court rulings in this case create “a blueprint for federal regulators to debank disfavored industries or companies in the future without interference from state regulators,” according to the filing submitted to the Supreme Court.
Who’s Affected?
Custodia Bank is a Wyoming-chartered, crypto-focused institution founded by Wall Street veteran Caitlin Long. It first applied for a Fed master account in October 2020. The Kansas City Fed denied that application in January 2023, citing concerns about the bank’s crypto-related business model — nearly 28 months after the application was submitted. Custodia had already sued the Kansas City Fed in June 2022, initially over the processing delay, and later broadened its argument to contend that federal law requires master account access for eligible institutions.
The bank lost at the district court level in 2024, then lost again before the Tenth Circuit Court of Appeals in 2025. A full-court rehearing was denied in a 7-3 decision in March 2026. Custodia petitioned the Supreme Court last month, asking the justices to rule on whether the Monetary Control Act — which states that the Fed “shall” provide payment services to eligible nonmember institutions — leaves any room for regional Fed banks to exercise discretionary denial authority. The Kansas City Fed’s formal response to the petition is due by September 11.
The stakes extend well beyond Custodia. Any state-chartered bank serving digital asset clients now operates under the shadow of this case. If regional Fed banks retain broad discretion to deny master accounts, state banking charters — which Wyoming and several other states have specifically designed to accommodate crypto businesses — become significantly less useful. The Blockchain Association’s amicus brief essentially argues that federal regulators should not be permitted to nullify state-level regulatory decisions through administrative gatekeeping.
There is a telling asymmetry embedded in this dispute. In March 2026 — the same month Custodia’s rehearing request was denied — the Kansas City Fed granted Kraken Financial a limited-purpose master account, making it the first crypto-native firm to receive one. That arrangement gives Kraken access to core dollar settlement infrastructure, though without the ability to earn interest on reserves. The juxtaposition is legally significant: if the Fed can selectively grant partial access to one crypto firm while systematically denying full access to another, it suggests the institution is exercising something closer to discretionary policy than neutral administrative process — precisely the argument Custodia is now asking the Supreme Court to adjudicate. The Kraken precedent neither vindicates nor defeats Custodia’s position, but it does confirm that the Fed’s master account decisions are not binary or uniform, which may strengthen the case for judicial review.
How Custodia’s Position Compares to Kraken Financial’s
| Factor | Custodia Bank | Kraken Financial |
|---|---|---|
| Charter type | Wyoming Special Purpose Depository Institution | Wyoming Special Purpose Depository Institution |
| Master account application | Applied October 2020; denied January 2023 | Granted limited-purpose account March 2026 |
| Access to payment rails | Denied — must use intermediary banks | Partial — core high-value dollar settlement only |
| Interest on reserves | N/A (denied access) | Not included in limited-purpose arrangement |
| Legal status | Petitioning Supreme Court after two court losses | Operating under limited Fed arrangement |
| Reviewing Fed bank | Kansas City Fed | Kansas City Fed |
The comparison matters because both institutions hold identical charter types from the same state, were reviewed by the same regional Fed bank, and serve overlapping market segments — yet received diametrically opposite outcomes. That inconsistency sits at the heart of Custodia’s legal argument and may be the detail that persuades the Supreme Court the case is worth hearing.
What Comes Next?
The immediate procedural milestone is the Kansas City Fed’s September 11 response deadline. The Supreme Court will then decide whether to grant certiorari — agreeing to hear the case — or deny it, which would leave the Tenth Circuit’s ruling in place and effectively close the door on Custodia’s legal challenge. The Court accepts a small fraction of the petitions it receives each term, and there is no guarantee this one will advance.
If the Court does take up the case, the implications for the broader crypto regulatory landscape would be substantial. Congress is simultaneously debating the structure of digital asset oversight — the CLARITY Act, which would establish clearer jurisdictional lines for crypto regulation, is in its final legislative stages — and a Supreme Court ruling on Fed discretion over master accounts would interact directly with whatever statutory framework emerges. A ruling that constrains Fed gatekeeping could accelerate institutional adoption of digital asset banking services; one that affirms it could entrench the intermediary-dependent model that currently governs the sector. The broader question of how the U.S. financial system admits — or excludes — crypto-native institutions is also visible in other venues: regulated crypto derivatives products are reaching Wall Street, even as fundamental banking infrastructure remains contested. Meanwhile, enforcement actions like the Shelbit sanctions case demonstrate that regulators are not retreating from oversight — they are simply applying it unevenly.
The Implications That Matter
- The Monetary Control Act’s plain language is now a Supreme Court question. The statute uses the word “shall” when describing the Fed’s obligation to provide payment services — if the Court finds that mandatory language binding, it could strip regional Fed banks of broad denial authority and force a rewrite of how master account decisions are made.
- State-chartered crypto banks face an existential structural risk. Wyoming and other states have invested in purpose-built banking charters for digital asset businesses; if the Supreme Court declines the case and Tenth Circuit precedent stands, those state-level frameworks are substantially undermined by a federal administrative veto that operates outside normal legislative channels.
- The Kraken precedent complicates the Fed’s legal position. Having granted one crypto-native institution partial master account access while denying another outright, the Kansas City Fed will need to articulate a principled distinction — a task that may prove difficult under Supreme Court scrutiny.
- Industry amicus coordination signals escalating institutional pressure. The Blockchain Association’s formal filing is not merely symbolic; it places the organized crypto industry on record at the highest judicial level, and any other trade groups or institutions that join future briefs will further signal to the Court that the issue carries systemic market weight.
- Congressional action could render the question moot — or sharpen it. If the CLARITY Act or related legislation explicitly addresses crypto bank access to Fed infrastructure before the Court rules, the statutory landscape could shift in ways that either resolve or reframe Custodia’s petition.
