Custodia Bank seeks Supreme Court review of Fed master‑account denial

Custodia Bank, a Wyoming‑chartered digital‑asset bank, has filed a motion for a 30‑day extension to submit a certiorari petition to the U.S. Supreme Court, seeking review of a Ninth Circuit decision that upheld the Federal Reserve’s discretion to deny its master‑account application [1].

Key takeaways

• Custodia requests an extension until July 10, 2026 to file its Supreme Court petition [1].
• The Tenth Circuit ruled that regional Reserve Banks may deny master accounts to eligible non‑member banks, a position Custodia says conflicts with the Monetary Control Act [1].
• The bank’s original master‑account request was denied by the Kansas City Fed in January 2023, citing digital‑asset risks [1][3].
• A full‑court rehearing was denied by the Tenth Circuit on March 13, 2026, leaving the appellate path exhausted [3][4].
• The Fed has granted a limited “skinny” master account to Kraken, showing a narrow pathway for crypto‑adjacent firms [1][5].

Legal battle reaches the Supreme Court

Custodia’s effort began with an application for a Federal Reserve master account in October 2020, a prerequisite for direct access to the nation’s payment infrastructure [1]. The Federal Reserve Bank of Kansas City rejected the request in January 2023, arguing that the bank’s crypto‑focused model posed risks to the payment system and financial stability [3]. Custodia responded by suing the Fed in June 2022, contending that the Monetary Control Act obligates the central bank to provide services to eligible non‑member institutions. A Wyoming district court ruled against Custodia in 2024, and the 2‑1 panel of the Tenth Circuit affirmed that decision in October 2025, holding that Reserve Banks have discretionary authority over master‑account approvals [1][4].

After the panel’s ruling, Custodia petitioned for an en banc rehearing, arguing that the majority misread the Monetary Control Act’s mandate. The full Tenth Circuit denied the petition on March 13, 2026, by a 7‑3 vote, reinforcing the precedent that Reserve Banks may refuse master‑account applications even from legally eligible banks [3][4]. The dissenting opinion warned that such discretion could effectively “hand the Reserve banks a veto over states’ chartering power” [4].

Next steps and limited alternatives

With the appellate avenue closed, Custodia is now seeking a Supreme Court certiorari petition and has asked the Court for additional time to prepare its filing, citing the complexity of the issues and other pending deadlines [1][2]. Justice Neil Gorsuch reportedly granted the extension, moving the filing deadline to July 11, 2026 [2]. Should the Supreme Court agree to hear the case, it would decide whether the Federal Reserve’s discretion to deny master accounts is lawful.

In the meantime, the Fed has introduced a “skinny” master account—a limited‑access product granted to Kraken in March 2026—that provides a narrower set of payment‑rail capabilities to crypto‑adjacent firms [1][5]. Custodia could reapply under this newer framework or continue to rely on correspondent banking relationships, which are more costly and less efficient.

Why it matters

The dispute highlights a fundamental tension between emerging digital‑asset banking models and longstanding central‑bank oversight. A Supreme Court ruling could reshape the regulatory landscape for crypto‑focused banks seeking direct access to the Federal Reserve’s payment system, potentially influencing how the Fed balances innovation with systemic risk. Until the Court acts, Custodia and similar institutions must navigate a fragmented access regime, relying on limited “skinny” accounts or third‑party intermediaries to conduct settlement and clearing operations.