Cryptobank Custodia has lost another legal battle in its campaign to challenge the Federal Reserve’s position as the final authority to issue key accounts. The development comes after the U.S. Court of Appeals for the Tenth Circuit denied digital bank Caitlin Long’s request for reconsideration following a favorable ruling for the Federal Reserve in October 2025.
Custodia loses 6-year legal battle with FRBKC
In 2023, the Federal Reserve Bank of Kansas City (FRBKC) rejected Custodia’s request for a main account, a token that would give the crypto bank access to the Fed’s payment rails, thus eliminating the need for intermediary services. It is worth noting that Custodia challenged this decision in the Wyoming district court in 2024, claiming its right to its main account as a non-member depository institution, and also argued that FRBKC did not have the constitutional authority to reject its request and satisfy the demand.
After an initial defeat in that state court, Custodia took its case to the U.S. Court of Appeals for the Tenth Circuit, where a three-judge panel also sided with the Federal Reserve, upholding central banks as the ultimate authority to issue principal accounts regardless of nominee eligibility. In December 2025, the cryptocurrency bank filed for an en banc hearing involving a full panel of ten people. However, independent editor Eleanor Terret reports that the appeals court upheld the first decision in favor of FRBKC.
🚨NEW: The 10th round was rejected @custodiabank‘s about a full review of the court in the fight with his main account @federalreserveafter a panel ruled in October that Reserve Banks have legal discretion to deny access to basic accounts.
Activist judges voted 7-3 against… https://t.co/SXE4qf5TBH pic.twitter.com/O9pQ9zrH5h
— Eleanor Terrett (@EleanorTerrett) March 13, 2026
More details show that the decision was reached by a vote of 7-3, with a majority of the panel agreeing that the Federal Reserve has the final authority in such matters of account assignment. Notably, dissenting Justices Timothy Timkovich and Allison Eide warned that giving the Federal Reserve Banks unfettered authority to accept or reject requests from state-chartered institutions would violate the Monetary Control Act of 1980.
What does the future hold for Custodia?
Regarding its next steps, Custodia is within its rights to take the case to the US Supreme Court. However, the likelihood of the country’s highest court granting such review is low. Alternatively, a crypto bank can apply for a special limited master account recently granted to crypto exchange Kraken by FRBKC. Although this is different from standard basic accounts, both of them have similar features that can make operations easier for Custodia.
At the time of writing, Custodia has yet to issue any official response to the recent Court of Appeal ruling.
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