• Senator Cynthia Lummis and former Senator Pat Toomey have urged the Supreme Court to hear Custodia Bank's master account challenge
• The lawmakers argue the Federal Reserve lacks statutory authority to deny eligible applicants broad access to master accounts
• Court filings allege a two-track approval process favoring federally insured institutions over uninsured applicants
• Custodia waited 19 months for a decision before its application was ultimately rejected in 2023
• The lawmakers say the Federal Reserve's withdrawal of its 2023 crypto policy statement weakens the basis for the original denial
• The case could determine how digital asset institutions gain access to the Federal Reserve's payment system



The battle over whether crypto-focused financial institutions should receive direct access to the Federal Reserve's payment system has reached the U.S. Supreme Court, with current and former lawmakers arguing the central bank has created an uneven approval process that disadvantages uninsured institutions.

Senator Cynthia Lummis, Republican of Wyoming, former Senator Pat Toomey, Republican of Pennsylvania, and two digital asset organizations have filed briefs urging the Supreme Court to hear Custodia Bank's long-running legal challenge against the Federal Reserve and the Federal Reserve Bank of Kansas City over the denial of a master account.

The dispute centers on whether regional Federal Reserve Banks possess broad discretion to reject master account applications or whether eligible institutions have a statutory right to access the central bank's payment infrastructure.

In their filing, Lummis and Toomey criticized a ruling by the 10th Circuit Court of Appeals, arguing the judges incorrectly inferred that regional Federal Reserve Banks possess authority to reject master account applications based on reporting requirements established under the 2022 Toomey Amendment.

"The amendment confers no statutory authority and prescribes no criteria for master-account approval or rejection," the lawmakers wrote.

They further argued that Congress routinely imposes reporting requirements when it seeks greater transparency over agency decision-making rather than granting additional regulatory authority.

According to the filing, data collected under the reporting framework reveals what the lawmakers described as a "two-track system" for applicants seeking Federal Reserve master accounts.

Among federally insured institutions classified as Tier 1 applicants under the Federal Reserve's own framework, the filing states that 92 of 111 applications were approved, with resolved applications taking a median of 54 days and only a single rejection.

By contrast, among applicants without federal deposit insurance, only three of 56 applications were approved, representing approximately 9% of resolved cases, while decisions took a median of 648 days.

Custodia first filed suit against the Federal Reserve in June 2022 after waiting 19 months for a decision on its master account application.

The Wyoming-chartered institution argued the delay contrasted sharply with Federal Reserve materials indicating that applications typically require only five to seven business days for processing.

The dispute intensified later that year after the Federal Reserve approved Bank of New York Mellon to provide custody services for digital assets.

Custodia alleged the decision demonstrated preferential treatment toward a traditional financial institution pursuing crypto-related activities.

The Federal Reserve rejected those allegations, maintaining its supervisory decisions were based on each institution's individual circumstances.

In January 2023, the Federal Reserve and the Kansas City Fed formally denied Custodia's applications for both a master account and Federal Reserve membership.

Regulators argued the bank's business model relied too heavily on the volatility of crypto asset markets, lacked sufficient controls to manage illicit finance risks, demonstrated limited experience managing traditional banking risks and could create broader implications for the stability of the financial system.

However, Lummis and Toomey contend that subsequent regulatory developments have weakened the rationale supporting that decision.

Their filing notes that in December 2025 the Federal Reserve rescinded its 2023 policy statement that had treated crypto asset activities as presumptively inconsistent with safe and sound banking practices.

The lawmakers argue that reversal further strengthens the case for Supreme Court review by raising broader questions about the Federal Reserve's authority over master account access and the consistency of its regulatory approach toward digital asset institutions.

A decision by the Supreme Court on whether to hear the case could have significant implications for the future relationship between the U.S. banking system and digital asset firms.

If the Court agrees to review the dispute, it would offer the first opportunity for the nation's highest court to clarify the legal boundaries governing access to one of the banking system's most important pieces of financial infrastructure.