Custodia Bank Petitions Full Appeals Court for Rehearing in Landmark Fed Master Account Case

Wyoming-based crypto bank Custodia Bank has escalated its legal battle with the Federal Reserve by filing a petition for a rehearing en banc with the U.S. Court of Appeals for the Tenth Circuit. The filing, submitted on December 15, 2025, requests that the full panel of active judges reconsider an October ruling by a three-judge panel that sided with the Federal Reserve Bank of Kansas City in denying Custodia access to a master account.

Custodia's petition argues the appellate panel misinterpreted the Monetary Control Act, which the bank contends grants any eligible bank the statutory right to a Federal Reserve master account. The filing asserts the panel's interpretation improperly expanded the Fed's discretion and conflicted with the law's original intent. Furthermore, Custodia claims the ruling undermines state banking authority, specifically Wyoming's decision to charter it as a Special Purpose Depository Institution (SPDI), and raises significant constitutional questions regarding separation of powers and federal overreach.

The bank warns that allowing federal regulators to override state-chartered bank eligibility sets a dangerous precedent, potentially giving the Federal Reserve unchecked power to deny any state-chartered bank access to the core payment system. A rehearing en banc is a relatively rare procedure typically reserved for cases of exceptional importance or conflicting precedent. If granted, the full Tenth Circuit would re-examine the legal questions at the heart of the dispute.

The outcome of this case carries far-reaching implications for the crypto banking sector. A master account is considered critical for operating at scale within the U.S. financial system, as it provides direct access to Federal Reserve payment rails for moving money and settling transactions, eliminating the need for an intermediary bank. A victory for Custodia would signal that compliant crypto banks can achieve parity with traditional banks, potentially unleashing a wave of regulated innovation. Conversely, a finalized denial could cement barriers, pushing crypto services further to the fringes of finance. If the rehearing request is denied, Custodia's remaining option would likely be an appeal to the U.S. Supreme Court.