No Automatic Right to a Fed Master Account: Tenth Circuit Confirms Reserve Bank Discretion and Limits APA Review

Introduction

In a closely watched dispute at the intersection of payments infrastructure, digital-asset banking, and administrative law, the Tenth Circuit held that Federal Reserve Banks have statutory discretion to deny “master account” access—even to institutions that are otherwise eligible under federal law. In Custodia Bank, Inc. v. Federal Reserve Board of Governors; Federal Reserve Bank of Kansas City (decided October 31, 2025), the court affirmed a Wyoming district court’s judgment upholding the Federal Reserve Bank of Kansas City’s (FRBKC) denial of a master account to Custodia Bank, a Wyoming-chartered Special Purpose Depository Institution (SPDI) focused on digital assets.

The decision turns on the interpretation of three federal provisions:

• Federal Reserve Act § 13 (codified at 12 U.S.C. § 342) — “Any Federal reserve bank may receive . . . deposits.”
• Monetary Control Act § 11A (codified at 12 U.S.C. § 248a(c)(2)) — “All Federal Reserve bank services covered by the fee schedule shall be available to nonmember depository institutions . . . .”
• The 2022 Toomey Amendment (codified at 12 U.S.C. § 248c) — requiring a public database identifying master account applications as approved, rejected, pending, or withdrawn, and classifying applicants by eligible category.

Beyond statutory interpretation, the opinion addresses threshold APA reviewability (no final agency action by the Board) and rejects resort to mandamus because the duty claimed (grant the account) is not nondiscretionary. A robust dissent would have held the Monetary Control Act’s “shall be available” language mandates access for all eligible nonmember depository institutions, invoking constitutional-avoidance concerns about unreviewable executive power lodged in non-Presidentially appointed officials.

Summary of the Opinion

• Holding on access: Reserve Banks have discretion under 12 U.S.C. § 342 to accept deposits (and therefore to open master accounts), and nothing in 12 U.S.C. § 248a(c)(2) eliminates that discretion. The “shall be available” clause is a pricing-and-availability principle directed to the Board’s fee-setting function, not an access mandate binding Reserve Banks.
• Support from Toomey Amendment: The public database statute, 12 U.S.C. § 248c, expressly contemplates that eligible entities may be “rejected,” confirming Congress expected Reserve Bank discretion to deny some applications.
• Jurisdiction/APA: The Board’s “no concerns” email—which preceded the FRBKC’s denial—was not a final agency action (Bennett v. Spear finality test not met). Decisions on individual accounts are made by Reserve Banks, not the Board.
• Mandamus and declaratory relief: Because the statutes confer discretion on Reserve Banks, there is no clear, nondiscretionary duty to grant access; mandamus and declaratory relief fail.
• Constitutional arguments: Due process and Appointments Clause theories do not alter the interpretation; certain arguments were dismissed earlier or waived, and the court saw no due process violation because the decisionmaker is the Reserve Bank president (not the competitor-populated portion of the board).
• Disposition: Judgment for Defendants affirmed on all claims.
• Dissent: Would read § 248a(c)(2) as a clear mandate for universal access for eligible nonmember institutions, regard Toomey as a transparency measure only, and invoke constitutional avoidance to reject the majority’s grant of unreviewable discretion to non-Presidentially appointed bank officials.

Detailed Analysis

I. Statutory Framework and the Court’s Reading

1) Federal Reserve Act § 342 (“may receive . . . deposits”). The Tenth Circuit treats § 342 as the source of Reserve Banks’ account-opening authority because master accounts exist to hold deposits and settle transactions. The key phrase—“may receive”—uses permissive language that ordinarily confers discretion. The court relied on the Supreme Court’s reading of the same section in Farmers’ & Merchants’ Bank of Monroe v. Federal Reserve Bank of Richmond, 262 U.S. 649 (1923), which recognized § 342 as “words of authorization” rather than an obligation to receive items for collection. If Reserve Banks have discretion to accept deposits, they necessarily have discretion regarding the accounts used to receive them.

2) Monetary Control Act § 248a(c)(2) (“shall be available . . . and . . . priced”). Custodia argued this language mandates master account access for all eligible nonmember depository institutions. The court disagreed for multiple reasons:

• Scope and addressee: Section 248a is a fee-setting directive to the Board of Governors. It is not addressed to Reserve Banks, which make account decisions. “Shall be available” appears in a list of “pricing principles” governing the Board’s schedule of fees, not a grant of rights enforceable against Reserve Banks.
• Context and structure (noscitur a sociis): Other subparagraphs in § 248a(c) plainly concern pricing mechanics, costs, and interest on float. That context supports reading (c)(2) as an availability-and-nondiscrimination principle tied to pricing and class-level availability, not a mandate to approve every qualified application.
• Textual nuance: Congress modified “all” as to “Federal Reserve bank services,” but not as to “nonmember depository institutions.” The court found the omission consequential given Congress’s frequent, deliberate use of “all” and “every” elsewhere when it intends universality.
• Elephants in mouseholes: Transforming a 1913 discretionary regime into a universal access mandate through one clause in a fee-setting section directed to a different actor (the Board) would “hide an elephant in a mousehole” (Whitman v. American Trucking).

3) Toomey Amendment § 248c (2022). By requiring the Board to publicly list master account applications as “approved, rejected, pending, or withdrawn,” and to classify each by eligibility status, Congress indicated that even eligible entities can be rejected. This contemporaneous statute reinforced the court’s conclusion that Reserve Banks retain discretion.

II. Precedents and Authorities Driving the Result

• Farmers’ & Merchants’ Bank of Monroe v. FRB of Richmond, 262 U.S. 649 (1923): “May” in § 342 confers discretion; not an obligation to receive checks or deposits; informs modern reading of account-opening discretion.
• Whitman v. American Trucking, 531 U.S. 457 (2001): “No elephants in mouseholes”; used to reject the argument that § 248a(c)(2) silently removed discretion conferred by § 342.
• Bennett v. Spear, 520 U.S. 154 (1997): “Final agency action” requires consummation of decisionmaking and legal consequences; Board’s advisory “no concerns” email was not final action; Reserve Bank made the final decision.
• Florida Power & Light Co. v. Lorion, 470 U.S. 729 (1985): APA review generally on the administrative record; supports appellate resolution without remand when the record is complete.
• Yates v. United States, 574 U.S. 528 (2015) and noscitur a sociis canon: Words are known by the company they keep; here, (c)(2) sits among pricing provisions.
• United States v. Wells Fargo & Co., 943 F.3d 588, 600 (2d Cir. 2019): Reserve Banks’ public-interest functions include promoting financial stability and payment system safety—a backdrop consistent with preserving discretion to mitigate risk.
• District court decisions in accord: Banco San Juan Internacional, Inc. v. FRB of New York, 762 F. Supp. 3d 247 (S.D.N.Y. 2025), and PayServices Bank v. FRB of San Francisco, 2024 WL 1347094 (D. Idaho Mar. 30, 2024) (unreported).
• Fourth Corner Credit Union v. FRBKC, 861 F.3d 1052 (10th Cir. 2017): Majority here distinguishes Judge Bacharach’s separate view that § 248a(c)(2) mandated access; notes that case’s splintered posture yielded no binding holding on the entitlement question.

III. Treatment of the APA, Mandamus, and Declaratory Relief

• APA claim against the Board: Dismissed for lack of jurisdiction. The Board’s “no-concerns” email was advisory and did not determine rights or carry legal consequences; FRBKC made the final decision. Without final agency action, the APA claim could not proceed.
• Mandamus against FRBKC: Denied. Mandamus requires a “clear nondiscretionary duty.” Because § 342 confers discretion and § 248a(c)(2) does not remove it, there is no nondiscretionary duty to grant an account.
• Declaratory relief: Derivative and fell with the statutory interpretation; the DJA does not create an independent cause of action.

IV. Constitutional Arguments and Waiver

• Due process: The court rejected the notion that competitor-influenced directors decided the application. Master account decisions are made by the Reserve Bank president, and statutory safeguards (director classes; Board oversight) address the conflict concerns. The court also observed that without a statutory entitlement, establishing a property/liberty interest would be difficult.
• Appointments Clause: The district court dismissed the claim; Custodia did not replead it in the amended complaint or adequately brief a distinct challenge to the Reserve Bank president’s appointment on appeal; therefore, those theories were waived.
• Constitutional avoidance: The majority declined to depart from the plain statutory reading to avoid hypothesized Article II problems, especially where arguments were waived or speculative in the posture presented.

V. The Dissent’s Counter-Reading

Judge Tymkovich would reverse. He reads § 248a(c)(2) as a clear, unambiguous command that the services “shall be available” to all eligible nonmember institutions and emphasizes:

• “Shall” denotes a nondiscretionary obligation; the sentence contains two commands—universal availability and equal pricing—and the first cannot be erased by context.
• Master accounts are the gateway to payment services; denying the account effectively denies services that § 248a(c)(2) commands be available.
• The omission of the word “all” before “nonmember depository institutions” is not materially meaningful; in legislative drafting, adding “all” would be superfluous in a plural-noun construction.
• The Toomey Amendment is about transparency, not a tacit approval of discretionary denials of eligible applicants.
• Granting Reserve Banks unfettered, unreviewable discretion risks serious Article II concerns (per Lucia, Free Enterprise Fund), by allowing non-Presidentially appointed officials to exercise “significant authority.”
• Even under mandatory access, the Fed retains other tools (e.g., risk policies, clearing balance requirements, limits on services not covered by § 248a) to mitigate systemic risk without shutting the door on eligibility-based access.

Impact and Practical Implications

A. Applicants for Master Accounts

• No automatic entitlement: Even if you are a “depository institution” eligible under § 461(b)(1), Reserve Banks can deny an application based on risk.
• Risk profile matters: The Board’s Guidelines (2022) remain important. Tier 3 institutions—uninsured and without federal prudential supervision—face “the strictest level of review.” Crypto-focused models will likely continue to encounter particular scrutiny.
• Strategic adjustments: Applicants may reassess whether to seek federal insurance, federal supervision, or other structural features (e.g., affiliations) that move them into less intensive review tiers.
• Alternative access: Without a master account, institutions must rely on correspondent relationships or private payment networks, potentially increasing cost, complexity, and counterparty exposure.

B. Reserve Banks and the Board

• Preserved discretion, preserved responsibility: Reserve Banks have clear latitude to deny access to protect payment system safety and soundness, but can expect ongoing transparency obligations under the Toomey Amendment.
• APA exposure limited: Advisory participation by the Board in Reserve Bank decisions will generally not be “final agency action,” curtailing APA challenges against the Board absent more formal Board action.
• Guidelines and process rigor: While the court did not assess arbitrariness, the record underscores the importance of detailed, risk-based analyses consistent with published guidelines and Operating Circulars.

C. State-Chartered Innovators (e.g., SPDIs)

• State innovation meets federal gatekeeping: Even where a state charter envisions novel bank models (e.g., no lending; 100% reserves), account access turns on federal discretion to manage payments risk.
• Roadmap: Demonstrable risk controls, governance, and (where feasible) federal insurance/supervision will be central to access prospects.

D. Litigation Landscape and Possible Next Steps

• Convergence among courts: The Tenth Circuit aligns with district court decisions (S.D.N.Y., D. Idaho) reading § 342 as preserving Reserve Bank discretion and § 248a(c)(2) as non-mandatory on access.
• Dissent signals future challenges: The dissent’s robust statutory and constitutional critique—especially on Article II—could fuel petitions for further review or congressional interest in clarifying access standards.
• Reviewability questions persist: Because Board involvement often remains advisory, APA routes are narrow. Plaintiffs may pivot to due process or other constitutional theories, but must overcome the lack of a recognized entitlement.
• Congressional action: If Congress wants universal access, it can amend § 342 or § 248a(c)(2) to unambiguously require Reserve Banks to grant accounts to all eligible institutions and define guardrails.

Complex Concepts, Simplified

• Master account: A Reserve Bank ledger account for a depository institution; the settlement hub for Fed payment services (wires, ACH, check clearing). Without it, a bank is effectively shut out of direct Fed services.
• Reserve Banks vs. Board: Reserve Banks (e.g., FRBKC) operate the accounts and payment services; the Board (in Washington, D.C.) oversees and sets policies (including fee schedules) but does not decide individual account applications.
• “Final agency action” (APA): To sue under the APA, you need an agency action that marks the end of the agency’s decisionmaking and has legal consequences. Advisory or consultative communications typically do not qualify.
• Mandamus: An extraordinary remedy to compel a government actor to perform a nondiscretionary duty. If a statute confers discretion, mandamus is unavailable.
• Noscitur a sociis: A canon of construction meaning a word’s meaning is informed by surrounding words. Here, that canon supports reading § 248a(c)(2) as a pricing/availability principle, not an access command.
• “Elephants in mouseholes”: Courts hesitate to find major policy shifts hidden in minor or tangential statutory phrases. The court refused to treat § 248a(c)(2) as silently overriding § 342’s express discretion.
• Toomey Amendment: A 2022 transparency measure requiring a public list of master account applications and their dispositions (approved/rejected/pending/withdrawn), with each applicant identified by eligible category—underscoring congressional awareness that eligible entities can be rejected.

Open Questions and Risk Areas

• Substantive standards for denial: While discretion is affirmed, standards governing when denials are proper remain primarily in guidance and policy (e.g., the 2022 Guidelines). How searching a record courts would require in other procedural postures remains to be seen.
• Review avenues against Reserve Banks: Reserve Banks’ status under the APA is unsettled in many contexts; plaintiffs may continue testing constitutional or state-law routes, though hurdles are substantial.
• When Board involvement becomes “final”: If the Board issues binding directives on specific applications, that could alter the finality analysis; this case involved advisory input without legal consequences.
• Article II issues: The dissent’s Appointments Clause concerns might reemerge if future records show Reserve Bank presidents exercising “significant authority” untethered from adequate federal supervision.
• Congressional calibration: Policymakers may revisit access rules to balance innovation and systemic risk, especially for uninsured or novel charter types.

Conclusion

The Tenth Circuit’s decision establishes a clear rule in its jurisdiction: there is no statutory entitlement to a Federal Reserve master account merely by virtue of eligibility. Reserve Banks retain discretion under § 342 to deny access based on risk, and § 248a(c)(2) does not convert that discretion into a universal right. The Toomey Amendment’s transparency requirement reinforces this understanding by presupposing that even eligible entities can be rejected. On the procedural front, advisory involvement by the Board is not “final agency action,” limiting APA challenges against the Board absent a consummated Board decision.

For state-chartered innovators and other nonmember institutions, the opinion underscores the centrality of risk governance, supervisory posture, and the practical value—if not necessity—of federal insurance or prudential oversight in the master account context. For Reserve Banks, the court’s reasoning preserves a core risk-management tool and signals that rigorous, guideline-based decisionmaking will remain the order of the day. The dissent, however, highlights enduring statutory and constitutional tensions, foreshadowing potential future litigation or legislative clarification over who governs access to the nation’s critical payment rails—and on what terms.