Custodia Bank, Inc. v. Federal Reserve Board of Governors, No. 24-8024 (published opinion, Ebel, J.; Tymkovich, J., dissenting)
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Research, not advice. Part of the Bitcoin research archive (October 2026). Claims labelled unverified, contested or fringe are reported, not endorsed; statuses of bills and rules are as of the date checked. Government, court and patent records are public domain; the research notes are CC BY 4.0.
Appellate Case: 24-8024 Document: 167 Date Filed: 10/31/2025 Page: 1
FILED
United States Court of Appeals
PUBLISH Tenth Circuit
UNITED STATES COURT OF APPEALS October 31, 2025
Christopher M. Wolpert
FOR THE TENTH CIRCUIT Clerk of Court
_________________________________
CUSTODIA BANK, INC.,
Plaintiff - Appellant,
v. No. 24-8024
FEDERAL RESERVE BOARD OF
GOVERNORS; FEDERAL RESERVE
BANK OF KANSAS CITY,
Defendants - Appellees.
------------------------------
AMERICANS FOR PROSPERITY
FOUNDATION-WYOMING; STATE OF
WYOMING; THE DIGITAL CHAMBER;
GLOBAL BLOCKCHAIN BUSINESS
COUNCIL-USA; FORMER SENATOR
PATRICK J. TOOMEY; BLOCKCHAIN
ASSOCIATION; SENATOR CYNTHIA
M. LUMMIS; SENATOR STEVE
DAINES; REPRESENTATIVE WARREN
E. DAVIDSON, Members of the U.S.
Senate Banking Committee and U.S. House
Financial Services Committee;
WYOMING SECRETARY OF STATE;
PROFESSOR DAVID ZARING;
INDEPENDENT COMMUNITY
BANKERS OF AMERICA; CONSUMER
BANKERS ASSOCIATION; AMERICAN
BANKERS ASSOCIATION; FEDERAL
RESERVE BANKS; THE BANK POLICY
INSTITUTE; THE CLEARING HOUSE
Appellate Case: 24-8024 Document: 167 Date Filed: 10/31/2025 Page: 2
ASSOCIATION, LLC; WYOMING
BANKERS ASSOCIATION,
Amici Curiae.
_________________________________
Appeal from the United States District Court
for the District of Wyoming
(D.C. No. 1:22-CV-00125-SWS)
_________________________________
Ian Heath Gershengorn, Jenner & Block LLP, Washington, D.C. (Michelle S. Kallen,
Laurel L. Rimon, Emanuel Powell III and Maria LaBella, Jenner & Block, LLP,
Washington, D.C.; Scott E. Ortiz, Williams, Porter, Day & Neville, P.C., Casper,
Wyoming; and Ryan Scarborough and Jamie Wolfe, Williams & Connolly LLP,
Washington, D.C., with him on the briefs) for Plaintiff-Appellant.
Jeffrey S. Bucholtz, King & Spalding LLP, Washington, D.C. (Christine M. Carletta and
E. Caroline Freeman, King & Spalding LLP Washington, D.C.; Andrew Z. Michaelson,
King & Spalding LLP, New York, New York; Billie LM Addleman and Erin E. Berry,
Hirst Applegate, LLP, Cheyenne, Wyoming; and Jared Lax, King & Spalding LLP,
Denver, Colorado, with him on the brief) for Defendant-Appellee Federal Reserve Bank
of Kansas City.
Joshua P. Chadwick, Senior Special Counsel (Mark Van Der Weide, General Counsel;
Richard M. Ashton, Deputy General Counsel; Yvonne F. Mizusawa, Senior Counsel;
Yonatan Gelblum, Senior Counsel; and Katherine Pomeroy, Senior Counsel, Board of
Governors of the Federal Reserve System, Washington, D.C., with him on the brief) for
Defendant-Appellee Board of Governors of the Federal Reserve System.
Michael Pepson, Americans for Prosperity Foundation, Arlington, Virginia, filed an
Amicus Curiae Brief on Behalf of Americans for Prosperity Foundation-Wyoming in
Support of Plaintiff-Appellant.
Bridget Hill, Attorney General; Devin Kenney, Senior Assistant Attorney General; and
Karl Anderson, Supervising Attorney General, Wyoming Attorney General’s Office,
Cheyenne, Wyoming, filed an Amicus Brief on Behalf of the State of Wyoming in
Support of Plaintiff-Appellant.
Paul D. Clement, Counsel of Record; Erin E. Murphy; C. Harker Rhodes IV; and Kevin
Wynosky (supervised by principals of the firm who are members of the Virginia bar),
Alexandria, Virginia, filed an Amici Curiae Brief on Behalf of the Digital Chamber and
Global Blockchain Business Council-USA in Support of Plaintiff-Appellant.
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Brent R. Baker, Counsel of Record, Buchalter, Salt Lake City, Utah, and Nicolas
Morgan, Investor Choice Advocates Network, Los Angeles, California, filed an Amicus
Curiae Brief on Behalf of Former Senator Patrick J. Toomey in Support of neither party.
Donald B. Verrilli, Jr. and Kathleen Foley, Munger, Tolles & Olson LLP, Washington,
D.C., filed an Amicus Curiae Brief on Behalf of Blockchain Association in Support of
Plaintiff-Appellant.
Chris Land, General Counsel, Office of Senator Cynthia M. Lummis, United States
Senate, Washington, D.C., filed an Amici Curiae Brief on Behalf of the Members of the
United States Senate Banking Committee and United States House Financial Services
Committee in Support of Plaintiff-Appellant.
Colin R. Crossman, Cheyenne, Wyoming, filed an Amicus Curiae Brief on Behalf of the
Wyoming Secretary of State in Support of Plaintiff-Appellant.
David Oscar Markus, Markus/Moss PLLC, Miami, Florida, filed an Amicus Curiae Brief
on Behalf of Professor David Zaring in Support of Defendants-Appellees.
Jonathan K. Youngwood, Simpson Thacher & Bartlett LLP, New York, New York, filed
an Amici Curiae Brief on Behalf of Federal Reserve Banks in Support of Defendants-
Appellees.
Mark W. Mosier, Randy Benjenk, and Jeffrey Luther, Covington & Burling LLP,
Washington, D.C., filed an Amici Curiae Brief on Behalf of the Bank Policy Institute and
the Clearing House Association L.L.C. in Support of Defendants-Appellees.
Jonathan S. Franklin, Norton Rose Fulbright US LLP, Washington, D.C., filed an Amici
Curiae Brief on Behalf of Independent Community Bankers of America, Consumer
Bankers Association, and American Bankers Association in Support of Defendants-
Appellees.
Greyson E. Tuck, Gerrish Smith Tuck, PC, Memphis, Tennessee, filed an Amicus Curiae
Brief on Behalf of Wyoming Bankers Association in Support of Defendants-Appellees.
_________________________________
Before TYMKOVICH, EBEL, and ROSSMAN, Circuit Judges.
_________________________________
EBEL, Circuit Judge.
_________________________________
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For over one hundred years, the Federal Reserve has served as our nation’s
central bank, providing important financial services to banks while maintaining the
safety and stability of our financial system. Plaintiff Custodia Bank is a Wyoming-
chartered bank that is not a member of the Federal Reserve. Custodia requested an
account (known as a “master account”) with the Federal Reserve Bank of Kansas
City (“FRBKC”), one of the twelve regional Reserve Banks that, along with the
Board of Governors (“Board”) and the Federal Open Market Committee, make up the
Federal Reserve System (the “Fed”). Despite agreeing that Custodia was statutorily
eligible for an account, FRBKC denied the request because it determined Custodia’s
crypto-focused business model introduced undue risk into the Fed’s payment systems
and services. In response, Custodia filed this suit against both FRBKC and the Board
arguing the Fed does not have any discretion over who gets access to Fed accounts
and services and must grant access to all eligible institutions no matter the risk they
pose to the federal financial system. We conclude the plain language of the relevant
statutes grants Federal Reserve Banks discretion to reject master account access
requests from eligible entities and, therefore, we reject Custodia’s attempt to impair
the Fed’s ability to safeguard our nation’s financial system through the exercise of
discretion to reject master account access. Exercising jurisdiction under 28 U.S.C.
§ 1291, we AFFIRM the district court’s judgment in favor of Defendants on all
claims.
This case turns on the interpretation of three distinct statutory provisions.
First, § 342 of the Federal Reserve Act (“FRA”), originally enacted in 1913, provides
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that “[a]ny Federal reserve bank may receive from any of its member banks, or other
depository institutions, . . . deposits.” 12 U.S.C. § 342. Second, § 248a of the
Depository Institutions Deregulation and Monetary Control Act (“MCA”), enacted in
1980, directs the Board to (1) establish a fee schedule to charge for the services the
Fed provides to banks, which the Fed had previously provided for free; and (2)
extend the availability of those services to banks that are not members of the Fed,
where those services had previously been provided only to member banks. Included
in a list of “pricing principles” that the Board’s fee schedule must adhere to is the
following clause: “All Federal Reserve bank services covered by the fee schedule
shall be available to nonmember depository institutions and such services shall be
priced at the same fee schedule applicable to member banks.” Id. § 248a(c)(2).
Third, in 2022 Congress enacted the “Toomey Amendment,” which requires the
Board to create a database listing all entities that have requested a master account and
whether each request was “approved, rejected, pending, or withdrawn.” Id.
§ 248c(b)(1)(B). The Board must also specify whether each entity is one of three
types of institution—all of which are statutorily eligible for an account. Id.
§ 248c(b)(1)(C).
Custodia argues that § 248a of the MCA requires the Fed to provide a master
account to every eligible nonmember depository institution that requests access
because § 248a(c)(2) provides that Fed services “shall be available to nonmember
depository institutions,” and a master account is necessary to use those services. We
disagree and conclude, like the district court and the two other courts to have
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considered the issue, that “§ 248a does not do the lifting Custodia demands of it.”
Custodia Bank, Inc. v. Fed. Rsrv. Bd. of Governors, 728 F. Supp. 3d 1227, 1241 (D.
Wyo. 2024).
Rather, it is § 342 of the FRA that addresses the Fed’s authority to open master
accounts by granting the Reserve Banks authority to receive deposits, and it makes
this authority discretionary. The Toomey Amendment confirms this understanding.
By requiring the Board to report on master account application rejections while
simultaneously addressing only those entities that are eligible for master accounts,
the Toomey Amendment clearly contemplates that Reserve Banks may reject
applications for master accounts from eligible entities.
The later-enacted § 248a in the MCA does not override the discretion
Congress granted in § 342 of the FRA to the regional Reserve Banks. Indeed, § 248a
does not address master account access at all. Each of the items listed in subsection
§248a(c)—including the “shall be available” clause of (c)(2)—are pricing principles
that the Board must comply with when it publishes the schedule of fees. But the
Board does not make master account access decisions—individual Reserve Banks do.
Thus, this provision prescribing how the Board must go about pricing services says
nothing about account access provided by Reserve Banks. Congress “does not . . .
hide elephants in mouseholes.” Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468
(2001). To conclude that Congress, in the MCA, significantly altered Reserve
Banks’ longstanding discretion over account access by mandating master account
access for all eligible institutions in a clause tucked away in a list of pricing
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principles directed at the Board and not at Reserve Banks would be to find an
elephant in a mousehole. Finally, § 248a(c)(2) does not provide that services shall be
available to “all” nonmember depository institutions, just that they shall be available
to nonmember depository institutions in general, as a class. Congress was deliberate
with its use of “all” in the FRA and MCA, and its choice not to include that modifier
before “nonmember depository institutions” in subsection (c)(2) signals it did not
intend to mandate automatic access for all qualifying nonmember depository
institutions.
Accordingly, Custodia is not automatically entitled to a master account. We
affirm the judgment of the district court in favor of Defendants on all claims.
I. BACKGROUND 1
A. The Federal Reserve System
The Federal Reserve consists of the Federal Reserve Board of Governors (“the
“Board”), the Federal Open Market Committee, and twelve regional Federal Reserve
Banks (“the “Reserve Banks”). Fed. Rsrv. Sys., The Fed Explained: What the
Central Bank Does 2 (11th ed. 2021) [hereinafter The Fed Explained]. The Board
exercises “broad oversight responsibility for the operations and activities of the
Reserve Banks.” Id. at 8; see 12 U.S.C. § 248(j). Much like a private corporation,
1
The parties have stipulated that “all evidence and discovery between
Custodia, FRBKC, and the Board’s administrative record may be relied upon by all
parties including any court hearing in this case throughout the remainder of this
litigation,” and this stipulation was approved by the District Court. Custodia Bank,
728 F. Supp. 3d at 1234.
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each Reserve Bank is run by its own nine-member board of directors, which appoints
a president to serve as the chief executive of the Reserve Bank and run day-to-day
operations. The Fed Explained at 9.
“[E]ach Reserve Bank acts as a ‘bank for banks.’ In that capacity, it offers
(and charges for) services to these depository institutions similar to those that
ordinary banks provide their individual and business customers: the equivalent of
checking accounts; loans; coin and currency; safekeeping services; and payment
services,” including check clearing and settlement, wire transfers, and automated
clearinghouse services. Id. at 11; see Julie Andersen Hill, Opening a Federal Reserve
Account, 40 Yale J. on Reg. 453, 462 (2023). In order to provide these services,
Reserve Banks are authorized to provide accounts for, and receive deposits from,
depository institutions. 2 See 12 U.S.C. § 342.
A depository institution can be either federally chartered or state-chartered. A
federally chartered institution is required to be a member of the Federal Reserve,
while a state-chartered institution can choose whether it wants to apply to be a
member of the Federal Reserve or not. A state-chartered Federal Reserve member
institution is subject to the supervision and regulation of the Federal Reserve in
addition to the supervision of the relevant banking regulator in the state that issued
its charter.
2
A bank is one type of depository institution. See 12 U.S.C. § 461(b)(1)(A).
The distinction between a bank and other types of depository institutions, such as
credit unions or savings associations, is not relevant in this case, so we use the terms
“bank” and “depository institution” interchangeably.
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Until the enactment of the MCA in 1980, most services provided by the
regional Reserve Banks were available only to Fed member banks. Subcomm. on
Domestic Monetary Pol’y of the House Comm. on Banking, Fin. & Urb. Affs., 98th
Cong., Report on the Role and Activities of the Federal Reserve System in the
Nation’s Check Clearing and Payments System, at 3 (Comm. Print 1984) [hereinafter
Domestic Monetary Policy Report]. This meant that a member bank could use the
Fed’s services to, for instance, transfer funds between it and any other member bank.
By contrast, a nonmember bank would have to use a private payment services
provider or partner with a member bank that had Fed access to execute such a
transaction. Id.
Prior to the enactment of the MCA, the Fed also offered its services free of
charge. It funded the provision of services by charging interest on the statutorily
required reserves that member banks had to hold in Fed accounts. Id.; see 38 Stat.
251, Section 19(b). In 1980, Congress passed the MCA, which contained several
significant changes to the Federal Reserve System. Pub. L. No. 96-221, 94 Stat. 132
(1980). Three changes are relevant to this case. First, the MCA extended reserve
requirements to nonmember institutions. See 12 U.S.C. § 461(b)(2)(D). Second, it
allowed nonmember institutions to use all of the Fed’s services. Id. § 248a(c)(2); id.
§ 342. Third, it directed the Fed to charge for these services and to do so without
discriminating between members and nonmembers. 12 U.S.C. § 248a.
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B. Master accounts
A master account is a depository institution’s bank account with the Fed, held
at one of the twelve regional Reserve Banks. 3 To use the Fed’s services, a depository
institution needs a master account. See Fourth Corner Credit Union v. Fed. Rsrv.
Bank of Kansas City, 861 F.3d 1052, 1053 (10th Cir. 2017) (Op. of Moritz, J.). If a
depository institution does not have a master account, then it can access the Fed’s
payment systems by partnering with another institution in a “correspondent
relationship,” in which the correspondent institution acts as an intermediary to
facilitate Fed service transactions for the respondent institution that lacks master
account access. See Hill, supra, at 460. Alternatively, institutions without master
accounts can use payment services offered by private competitors to the Fed, such as
3
As the Board explains, a master account is
a record of financial transactions that reflects financial rights and
obligations of an account holder and the Reserve Bank with respect to
each other, where opening and closing balances are determined. All
credits and debits resulting from the use of Federal Reserve services [are]
booked to this one account at one Reserve Bank for each separately
chartered institution.
Interstate Branching: New Account Structure, Fed. Rsrv. Bd.,
https://www.federalreserve.gov/generalinfo/isb/qanda.htm (last updated Sept. 27,
2002). Historically, a depository institution could have multiple accounts with the
Fed. Hill, supra, at 462. For instance, an institution might have a “clearing account”
for temporarily holding transactions as well as a “reserve account” for holding
required reserves at the Fed. Id. Additionally, a depository institution with broad
geographic scope might have had accounts with multiple Reserve Banks around the
country. In 1998, the Fed changed its account structure to consolidate these multiple
accounts into a single “master” account for each institution. See id. Each institution
now has a single master account through which it accesses all Fed services.
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the Clearing House Interbank Payments System, which competes with the Federal
Reserve’s Fedwire service.
The statutory requirements to be eligible for a master account are simple: a
bank must be chartered under either state or federal law and be “engaged in the
business of receiving deposits, other than trust funds.” 4 12 U.S.C. § 1813(a). It is
undisputed that Custodia is statutorily eligible for a master account.
C. Custodia Bank
Custodia was founded in 2020 to provide banking services for digital asset
companies and to serve as a bridge between digital assets and the U.S. dollar
payment system for institutional customers. 5 It is chartered in Wyoming under the
state’s Special Purpose Depository Institution (SPDI; pronounced “speedy”) charter,
which was established by state statute in 2019. H.B. 74, 65th Leg., Gen. Sess. (Wyo.
2019); Wyo. Stat. Ann § 13-12-101, et seq. Like a traditional bank, a SPDI can
4
No statutory provision expressly refers to “master accounts” (or any other
type of Federal Reserve account). Rather, master accounts are a creation of the Fed
pursuant to its authority to take deposits and provide services. The parties agree that
an entity is eligible for a master account if it is a “nonmember depository institution.”
The definition of “depository institution” includes “any bank which is eligible to
make application to become an insured bank under section 5 of [the Federal Deposit
Insurance Act.]” 12 U.S.C. § 461(b)(1)(A)(i). In turn, a bank is eligible to make an
application to become an insured bank under that section if it is “engaged in the
business of receiving deposits, other than trust funds,” and is “incorporated under the
laws of any State.” Id. § 1813(a).
5
A digital asset is a “digital representation of value” recorded on a
“cryptographically secured distributed ledger,” such as a blockchain. 26 U.S.C.
§ 6045(g)(3)(D) (providing the Internal Revenue Service definition of “digital
asset”); see also Wyo. Stat. Ann. § 34-29-101 (providing the Wyoming definition of
“digital asset”). Digital assets include things like cryptocurrencies (including
stablecoins) and non-fungible tokens (NFTs).
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receive deposits of U.S. dollars and provide payment services to its customers. Wyo.
Stat. Ann. § 13-12-103(b)(iii)–(v). Unlike a traditional bank, a SPDI cannot make
loans and must have all customer deposits of U.S. dollars 100% backed by liquid
assets such as U.S. dollars or similar high-quality liquid assets. Id. §§ 13-12-103(c),
13-12-105.
In addition to handling U.S. dollars, a SPDI can provide digital asset custody
services where it holds digital assets in custody or trust for customers and undertakes
transactions with those assets on behalf of the customer. Id. § 13-12-103(b)(vii)(A).
SPDIs under a Wyoming charter are subject to regulation and supervision by the
Wyoming Division of Banking, id. § 13-12-119, and are required under Wyoming
law to “comply with all applicable federal laws, including those relating to anti-
money laundering, customer identification and beneficial ownership,” id. § 13-12-
107.
As permitted by its SPDI charter, Custodia plans to hold U.S. dollar deposits
in its Fed master account and, separately, to provide custody for digital assets. Since
it is not permitted to make loans, Custodia intends to make money by charging its
customers transaction fees.
D. Custodia’s master account application
After receiving its SPDI charter from the state of Wyoming, Custodia applied
for a master account with defendant FRBKC in October 2020. In January 2021,
FRBKC confirmed that Custodia was legally eligible for a master account and told
Custodia there were “no showstoppers” with its application. To alleviate potential
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concerns with Custodia being supervised only by Wyoming regulators, Custodia also
applied to become a member of the Federal Reserve system, and thus subject to
Federal supervision, in August 2021.
While Custodia’s applications were pending, the Board published a final rule
establishing guidelines for Reserve Banks to “utilize in evaluating requests for access
to Reserve Bank master accounts and services” (“Guidelines”). Guidelines for
Evaluating Account and Services Requests. 87 Fed. Reg. 51,099, 51,099 (Aug. 19,
2022). The rule was intended to standardize and clarify the master account
application review process in light of increasingly common requests for master
accounts from banks with “novel charter types” like Custodia. See id. The
Guidelines establish a framework classifying applicants into three tiers to determine
the level of scrutiny Reserve Banks are to apply in evaluating an application. Id. at
51,109–10. Institutions that are federally insured fall into Tier 1 and receive the least
amount of scrutiny. “[I]nstitutions that are not federally insured but are subject (by
statute) to prudential supervision by a federal banking agency” fall into Tier 2 and
receive an intermediate level of scrutiny. Id. at 51,109. Institutions, like Custodia,
that are not federally insured and are not subject to supervision by a federal banking
agency fall into Tier 3 and “generally receive the strictest level of review.” Id. at
51,110.
In addition to the Guidelines, the Board also sent out an “S-Letter” (an internal
guidance document) elaborating on procedures for Reserve Banks to follow in
implementing the Guidelines (“S-Letter 2667”). Among other things, S-Letter 2667
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provides that “[a]ny Reserve Bank that is considering denying any access request, . . .
should consult [the Board] prior to communicating any decision to the requesting
institution.” (J.A. 1814.)
In January 2023, applying the new Guidelines, FRBKC denied Custodia’s
application for a master account. On the same day, the Board denied Custodia’s
application for membership in the Federal Reserve. 6 In denying Custodia’s master
account application, FRBKC explained that Custodia’s novel and “unprecedented”
business model that was “narrowly focused on crypto-asset activities” presented
heightened risks that were “highly likely [to be] inconsistent with safe and sound
banking practices.” (J.A. 1949–50.) Without Custodia having supervision by a
federal banking agency or stronger processes to address these risks, FRBKC
determined that it would be too risky to grant Custodia a master account.
Pursuant to S-Letter 2667, FRBKC consulted with the Board and provided its
analysis of Custodia’s master account application prior to issuing the denial. In
response, the Board sent an email to FRBKC President Esther George explaining that
it had “reviewed the Reserve Bank’s record documenting application of the
Guidelines in evaluating [Custodia’s] access request” and had “no concerns with the
Reserve Bank moving forward with its plan to communicate to Custodia Bank its
decision to deny the request.” (J.A. 1102.)
6
The Board’s decision to deny Custodia’s application for membership in the
Federal Reserve is not at issue in this case.
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II. PROCEDURE
A. Initial complaint
In June 2022, nineteen months after submitting its master account application,
Custodia filed the present suit in the U.S. District Court for the District of Wyoming.
Though its application was submitted to FRBKC, Custodia sued not only FRBKC but
also the Board, alleging that the Board was involved in the decision to deny
Custodia’s master account application. In its initial complaint, Custodia brought
eight claims based on two basic arguments: (1) Defendants violated the law by failing
to act on Custodia’s application, and Custodia was entitled to a decision on the
application within a reasonable time under either the Administrative Procedure Act
(“APA”) or the Mandamus Act; and (2) Defendants are statutorily required to grant
Custodia’s application—that is, FRBKC has no authority or discretion to deny an
application for a master account from an entity that is statutorily eligible for such an
account.
FRBKC and the Board each filed motions to dismiss the complaint pursuant to
Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), which the district court
granted in part and denied in part. Relevant here, the court concluded that Custodia
had stated a plausible claim that it was statutorily entitled to a master account, and
that a final answer to the statutory entitlement question should await further factual
development during discovery. However, the district court granted the motions to
dismiss three claims based on the United States Constitution. First, the court
concluded Custodia had not plausibly alleged a violation of the Nondelegation
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Doctrine 7 because making master account access decisions is not a legislative power.
Second, Custodia had alleged that, if FRBKC has discretion to deny master account
access to eligible entities, then such decision-making authority violates the Due
Process Clause by vesting FRBKC’s board of directors, which is largely chosen by
and partially composed of self-interested executives from competitor banks, with
regulatory authority over Custodia. The district court concluded there was no due
process violation because master account application decisions are made by a
Reserve Bank’s president, not the board, and a Reserve Bank’s president is chosen
only by the six directors who are prohibited by statute from being representatives of
competitor banks. Third, the court concluded there was no violation of the
Appointments Clause because (1) it is a Reserve Bank’s president who makes master
account application decisions and (2) a Reserve Bank president is appointed with the
approval of the Board, which satisfies the Appointments Clause. See Free Enter.
Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477, 512 n.13 (2010) (“We have
previously found that the department head’s approval satisfies the Appointments
Clause . . . .”).
7
The nondelegation doctrine bars Congress from delegating legislative power
to another branch of government without providing “an intelligible principle to which
the person or body authorized to [act] is directed to conform.” See Whitman v. Am.
Trucking Ass’ns, 531 U.S. 457, 472 (2001) (quoting J.W. Hampton, Jr., & Co. v.
United States, 276 U.S. 394, 409 (1928)) (alteration in original).
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B. Custodia’s application is denied and Custodia responds by filing an
amended complaint
In January 2023, FRBKC denied Custodia’s application for a master account.
In response to the denial of its application, Custodia amended its complaint to allege
the three claims at issue in this appeal, each of which relies on Custodia’s asserted
entitlement to a master account under § 248a(c)(2). First, Custodia alleges the Board
violated the APA by denying Custodia’s application when § 248a(c)(2) entitles
Custodia to a master account. 8 Second, Custodia claims it is entitled to a writ of
mandamus against both Defendants compelling them to approve its application.
Third, Custodia claims it is entitled to a declaratory judgment that Defendants have a
statutory obligation to provide it with a master account. In essence, Custodia is
claiming that once it submitted a qualifying application for a master account, it had
an absolute right for that application to be approved by FRBKC.
Defendants once again each filed motions to dismiss. The district court once
again concluded Custodia had stated a plausible claim that it was statutorily entitled
to a master account and, therefore, the court denied the motions to dismiss the
amended complaint. 9
8
In its initial complaint, Custodia had brought a claim under the APA against
both the Board and FRBKC. In its amended complaint, Custodia did not reassert an
APA claim against FRBKC.
9
The one exception to this was Custodia’s request for a writ of mandamus
against the Board. Since the Mandamus Act grants relief only when there is no other
adequate remedy, the court granted the motion to dismiss the mandamus claim
against the Board because it concluded Custodia had another remedy against the
Board under the APA.
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C. The district court enters judgment in favor of Defendants
The case proceeded to discovery, after which Custodia filed a motion for an
order granting its petition for review on its APA claim pursuant to Federal Rule of
Appellate Procedure 15 and for judgment as a matter of law on its mandamus claim
pursuant to Federal Rule of Civil Procedure 56(a). 10 The Board and FRBKC each
opposed Custodia’s motion, and FRBKC additionally filed its own cross-motion for
summary judgment on the mandamus claim against it. Custodia Bank, 728 F. Supp.
3d at 1231–32.
In the ruling at issue in this appeal, the district court denied Custodia’s motion
and granted FRBKC’s motion for summary judgment, thereby disposing of all claims
against both Defendants. Id. First, the district court explained that the merits
analysis was the same under both the APA and the Mandamus Act: the dispositive
question was whether Custodia was statutorily entitled to a master account or
whether, instead, the defendants had discretion in granting master accounts to eligible
10
Custodia did not specifically move for judgment on its request for
declaratory relief. The district court had previously concluded, in its order largely
denying Defendants’ motions to dismiss Custodia’s amended complaint, that, while
the DJA provides an additional remedy for a valid federal cause of action, it does not
provide a stand-alone cause of action. See Hanson v. Wyatt, 552 F.3d 1148, 1157
(10th Cir. 2008) (“The Declaratory Judgment Act does not create substantive rights.”
(cleaned up)); Nero v. Oklahoma, No. 22-6121, 2022 WL 14423872, at *2 (10th Cir.
Oct. 25, 2022) (unpublished) (“[T]he Declaratory Judgment Act does not provide an
independent federal cause of action.”). Custodia does not dispute this conclusion.
We also note that Custodia’s DJA claim simply requests a declaration “that the Board
and/or [FRBKC] has a statutory obligation to provide Custodia with a master
account,” so the claim turns entirely on the same question of statutory interpretation
that resolves the mandamus claim. (J.A. 433.) Therefore, we do not separately
analyze Custodia’s DJA claim.
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entities. Id. at 1234. However, the court held that Custodia’s APA claim against the
Board failed for lack of jurisdiction because it was FRBKC who had denied the
application and there was no final agency action by the Board. Id. at 1237. Finally,
the district court ruled that “[t]he plain language of the relevant statutes can only
reasonably be read to give the Federal Reserve Banks discretion in granting or
denying requests for master accounts.” Id. at 1245. Therefore, Custodia was not
entitled to a master account and Defendants were entitled to judgment in their favor
on each of Custodia’s claims. Custodia now appeals this ruling.
III. STANDARD OF REVIEW
We “review a district court’s grant of summary judgment de novo, using the
same standard applied by the district court.” Cillo v. City of Greenwood Vill., 739
F.3d 451, 461 (10th Cir. 2013) (citing Tabor v. Hilti, Inc., 703 F.3d 1206, 1215 (10th
Cir. 2013)). Summary judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). In applying this standard, we “view facts in
the light most favorable to” the non-moving parties and resolve “all factual disputes
and reasonable inferences in their favor.” Cillo, 739 F.3d at 461 (quoting Tabor, 703
F.3d at 1215). This standard applies to our review of the district court’s judgment in
favor of FRBKC on Custodia’s mandamus claim. Rios v. Ziglar, 398 F.3d 1201,
1206 (10th Cir. 2005) (explaining that a district court’s determination of whether the
legal prerequisites for mandamus are met is reviewed de novo). We also review de
novo the district court’s dismissal of Custodia’s APA claim against the Board for
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lack of subject-matter jurisdiction. Farrell-Cooper Mining Co. v. United States Dep’t
of Interior, 864 F.3d 1105, 1109 (10th Cir. 2017).
Under the APA, a court will “hold unlawful and set aside agency action” if it
is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with
law.” 5 U.S.C. § 706(2)(A). For a plaintiff to be eligible for mandamus relief, the
government must owe a clear nondiscretionary duty to the plaintiff and the plaintiff
must have no other adequate remedy. See Rios, 398 F.3d at 1206; 28 U.S.C. § 1361.
IV. DISCUSSION
Each of Custodia’s claims relies on its assertion that it is statutorily entitled to
a master account and that FRBKC has no discretion to deny its compliant request for
a master account. 11 Thus, this case turns on the statutory interpretation of the three
relevant provisions of the FRA and the MCA identified in the introductory section of
this opinion. We briefly address the jurisdictional issue of whether Custodia
identified a “final agency action” taken by the Board, as required for APA review,
before turning to the statutory interpretation issue required to resolve the remaining
claims.
11
For its APA claim, Custodia alleges that the Board’s involvement in the
denial of Custodia’s master account application was unlawful because Custodia is
statutorily entitled to a master account. Custodia does not challenge the reasons
given for its application being denied or allege the Board violated the APA for any
reason other than failing to comply with Custodia’s alleged statutory right to a master
account. See Custodia Bank, 728 F. Supp. 3d at 1238. For its Mandamus Act claim,
Custodia alleges Defendants have a nondiscretionary duty to grant its master account
access request because Custodia is statutorily entitled to a master account.
Defendants do not dispute that mandamus relief would be appropriate if Custodia
were to prevail on its statutory entitlement theory.
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A. Custodia’s APA claim against the Board fails for lack of a final agency
action
In its amended complaint, Custodia asserts a claim under the APA against the
Board (but not FRBKC), alleging the Board’s involvement in FRBKC’s denial of
Custodia’s master account application was unlawful because Custodia is entitled to a
master account. Where, as here, review of an agency action is not expressly provided
for by statute, judicial review under the APA is available only for “final agency
action for which there is no other adequate remedy in a court.” 5 U.S.C. § 704. To
be “final,” an agency action must (1) “mark the consummation of the agency’s
decisionmaking process—it must not be of a merely tentative or interlocutory
nature”; and (2) “be one by which rights or obligations have been determined, or
from which legal consequences will flow.” Bennett v. Spear, 520 U.S. 154, 177–78
(1997) (internal quotation marks and citations omitted); see Ctr. for Native
Ecosystems v. Cables, 509 F.3d 1310, 1329 (10th Cir. 2007).
Custodia argues the Board took a final agency action by sending an email to
the FRBKC president stating the Board had “no concerns with the Reserve Bank
moving forward with its plan to communicate to Custodia Bank its decision to deny
the request.” (J.A. 1102.) But this email fails the second prong of the Bennett test
because it did not determine any rights or obligations or have any legal
consequences. Rather, it was only an intermediate advisory step along the path to
FRBKC’s final denial of the request. See Miami Tribe of Oklahoma v. United States,
198 F. App’x 686, 690 (10th Cir. 2006) (unpublished) (explaining that legal opinion
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letter from Department of the Interior to the National Indian Gaming Commission
(NIGC) was not a final agency action because Congress vested authority to decide
the relevant issue with NIGC). 12 The email itself refers to “[FRBKC’s] decision to
deny the request.” (J.A. 1102.) When the Board communicated its view on
FRBKC’s decision in the no-concerns email, it was still up to FRBKC to “mov[e]
forward with its plan” to deny the request. (Id.); see Sinclair Wyo. Refin. Co., LLC
v. United States Env’t Prot. Agency, 72 F.4th 1137, 1143 (10th Cir. 2023) (“[A]n
agency action must ‘itself [be] the source of the parties’ obligations, modifying the
applicable legal landscape by interpreting the scope’ of their statutory rights or
duties.” (quoting Kansas ex rel. Schmidt v. Zinke, 861 F.3d 1024, 1034 (10th Cir.
2017)).
We recognize that an agency action can, in certain cases, “qualif[y] as final
agency action even if the ultimate impact of that action rests on . . . a decision by
another administrative agency[] or conduct by a regulated party.” Prutehi Litekyan:
Save Ritidian v. United States Dep’t of Airforce, 128 F.4th 1089, 1110 (9th Cir.
2025). But the action must still determine rights or obligations or have legal
consequences by “alter[ing] the legal regime to which the [agency or other entity] is
subject.” Bennett, 520 U.S. at 169; see id. at 178. And there is nothing in the record
to suggest that the Board’s no-concerns email “alter[ed] the legal regime to which
12
We cite all unpublished decisions only for their persuasive value. See 10th
Cir. R. 32.1(A).
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[FRBKC] [was] subject.” Bennett, 520 U.S. at 169. The final decision was still
entirely up to FRBKC.
Our conclusion is reinforced by the relevant statutes and regulations. With
respect to the provision of accounts and services, the Board exercises only “general
supervision over [the] Federal reserve banks.” 12 U.S.C. § 248(j). Pursuant to this
authority, the Board published the Guidelines to establish consistent procedures for
Reserve Banks to follow when evaluating master account access requests. 87 Fed.
Reg. at 51,100. However, the Guidelines make clear that “[d]ecisions on individual
requests for access to accounts and services are made by the Reserve Bank.” Id. at
51,102. Thus, while the Board exercises supervisory authority and can offer its input
on Reserve Bank decisions, the ultimate decisions remain up to the Reserve Bank.
To be sure, in this case the Board was undoubtedly involved in FRBKC’s evaluation
of Custodia’s master account application, as FRBKC coordinated that evaluation with
the Board’s evaluation of Custodia’s Fed membership application to avoid
duplicative inquiries or conflicting analyses. But Custodia points to nothing in the
record that would allow us to conclude that it was not FRBKC who made the final
decision on Custodia’s master account application in this case. Therefore, the
Board’s no-concerns email did not determine any rights or obligations or carry legal
consequences for Custodia and, thus, did not constitute final agency action. 13
13
Custodia also argues that the question of who made the final decision is a
question of fact that should be decided by the district court in the first instance, so
remand on that question is appropriate. We disagree—review under the APA is
based on the administrative record, which has already been filed in this case, so
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B. Custodia is not statutorily entitled to a nondiscretionary award of a
master account from FRBKC
This issue requires us to interpret three specific provisions of three different
statutes. Because each of these provisions relates explicitly or implicitly to the Fed’s
authority to provide access to master accounts, we interpret them together. Our
primary task in reviewing these provisions is “to determine congressional intent,
using traditional tools of statutory interpretation.” M.S. v. Premera Blue Cross, 118
F.4th 1248, 1266 (10th Cir. 2024) (quoting Potts v. Ctr. for Excellence in Higher
Educ., Inc., 908 F.3d 610, 613 (10th Cir. 2018)). We begin by looking at the
statutory text “to determine whether the language at issue has a plain and
unambiguous meaning with regard to the particular dispute in the case.” Potts, 908
F.3d at 613 (quoting Ceco Concrete Constr., LLC v. Centennial State Carpenters
Pension Tr., 821 F.3d 1250, 1258 (10th Cir. 2016)). “The plainness or ambiguity of
statutory language is determined by reference to the language itself, the specific
context in which that language is used, and the broader context of the statute as a
whole.” Ceco Concrete, 821 F.3d at 1258 (quoting Robinson v. Shell Oil Co., 519
U.S. 337, 341 (1997)). We
consider how “important terms in the statute . . . relate to each other” to
determine “[t]he plain meaning of the statutory text,” Babb v. Wilkie, 589
U.S. 399, 404 (2020), because “[s]tatutory language ‘cannot be construed
in a vacuum,’” Sturgeon v. Frost, 577 U.S. 424, 438 (2016) (quoting
Roberts v. Sea-Land Servs., Inc., 566 U.S. 93, 101 (2012)).
remand would not lead to new factual development, and it is appropriate for us to
decide this question in this appeal. See Florida Power & Light Co. v. Lorion, 470
U.S. 729, 743–44 (1985).
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United States v. Davey, No. 24-3132, 2025 WL 2405322, at *4, --- F.4th --- (10th
Cir. Aug. 20, 2025) (alterations in original).
“If the language is plain and unambiguous, ‘our inquiry must cease and the
plain meaning of the statute controls.’” Ceco Concrete, 821 F.3d at 1258 (quoting
Nat’l Credit Union Admin. Bd. v. Nomura Home Equity Loan, Inc., 764 F.3d 1199,
1225 (10th Cir. 2014)). If, on the other hand, the language is ambiguous, then we
may look to the broader context and purpose of the statute to discern congressional
intent. See Nat’l Credit Union, 764 F.3d at 1225–26.
1. Relevant statutory provisions
With these principles in mind, we begin by outlining the three relevant
statutory provisions before explaining why their plain language grants Reserve Banks
discretion to reject master account applications from eligible entities.
First, § 342 of the FRA provides: “Any Federal reserve bank may receive from
any of its member banks, or other depository institutions, and from the United States,
deposits of current funds in lawful money, national-bank notes, Federal reserve notes,
or checks . . . .” 12 U.S.C. § 342 (emphasis added). Defendants argue, and we agree,
that this provision governs Reserve Banks’ authority with respect to approving or
denying master accounts because Reserve Banks use master accounts to receive
deposits.
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Second, § 248a of the MCA provides:
§ 248a. Pricing of services
(a) Publication of pricing principles and proposed schedule of fees;
effective date of schedule of fees
Not later than the first day of the sixth month after March 31, 1980, the Board
shall publish for public comment a set of pricing principles in accordance
with this section and a proposed schedule of fees based upon those principles
for Federal Reserve bank services to depository institutions, and not later
than the first day of the eighteenth month after March 31, 1980, the Board
shall begin to put into effect a schedule of fees for such services which is
based on those principles.
(b) Covered services
The services which shall be covered by the schedule of fees under subsection
(a) are--
(1) currency and coin services;
(2) check clearing and collection services;
(3) wire transfer services;
(4) automated clearinghouse services;
(5) settlement services;
(6) securities safekeeping services;
(7) Federal Reserve float; and
(8) any new services which the Federal Reserve System offers,
including but not limited to payment services to effectuate the
electronic transfer of funds.
(c) Criteria applicable
The schedule of fees prescribed pursuant to this section shall be based on the
following principles:
(1) All Federal Reserve bank services covered by the fee schedule
shall be priced explicitly.
(2) All Federal Reserve bank services covered by the fee schedule
shall be available to nonmember depository institutions and such
services shall be priced at the same fee schedule applicable to member
banks, except that nonmembers shall be subject to any other terms,
including a requirement of balances sufficient for clearing purposes,
that the Board may determine are applicable to member banks.
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(3) Over the long run, fees shall be established on the basis of all direct
and indirect costs actually incurred in providing the Federal Reserve
services priced, including interest on items credited prior to actual
collection, overhead, and an allocation of imputed costs which takes
into account the taxes that would have been paid and the return on
capital that would have been provided had the services been furnished
by a private business firm, except that the pricing principles shall give
due regard to competitive factors and the provision of an adequate
level of such services nationwide.
(4) Interest on items credited prior to collection shall be charged at the
current rate applicable in the market for Federal funds.
Id. § 248a (emphasis added). This is the core of Custodia’s argument. Custodia
relies on this brief clause in subsection (c)(2) that we have underlined for emphasis—
“[a]ll Federal Reserve bank services covered by the fee schedule shall be available to
nonmember depository institutions”—to argue that this one isolated clause in a
provision dealing with equitable pricing establishes a mandatory, nondiscretionary
duty for Reserve Banks to approve master account applications from all nonmember
depository institutions who are statutorily eligible. 14 The profound impact and
14
Custodia relies heavily on Judge Bacharach’s separate opinion in Fourth
Corner Credit Union v. Federal Reserve Bank of Kansas City, in which he concluded
that § 248a(c)(2) mandates master account access for all eligible nonmember
depository institutions. 861 F.3d 1052, 1068 (10th Cir. 2017) (Op. of Bacharach, J.).
While Judge Bacharach’s opinion is relevant to our analysis in this case, it is not
controlling authority because that case resulted in a three-way split decision between
the three-judge panel, and the other two judges each voted to dispose of the case
without reaching the issue of the plaintiff’s statutory entitlement to a master account.
See id. at 1053 (per curiam); id. at 1058 (Op. of Moritz, J.) (“I would not decide
whether the Credit Union is entitled to a master account under 12 U.S.C. § 248a.”);
id. at 1058, 1063 (Op. of Matheson, J.) (concluding “[t]he issues the Credit Union
raises are not yet fit for judicial decision” and the case should be dismissed on
ripeness grounds); see also United States v. Guillen, 995 F.3d 1095, 1114–15 (10th
Cir. 2021) (“[A] concurring opinion in a splintered . . . decision . . . produces a
determinate holding[] when it is ‘a logical subset’ of the other opinion(s) concurring
in the judgment.”). Here, Judge Bacharach’s separate opinion on this issue is not a
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importance that Custodia attaches to this single isolated clause tucked deep into a
statutory provision that deals with a fairly isolated schedule of fees is indeed
remarkable and non-intuitive.
Third is the Toomey Amendment, enacted in 2022 as part of the National
Defense Authorization Act for Fiscal Year 2023, Public Law 117-263, which requires
the Board to publish a database of all entities holding or applying for master
accounts. It provides, in relevant part:
The Board shall create and maintain a public, online, and searchable database
that contains--
(A) a list of every entity that currently has access to a reserve bank
master account and services, including the date on which the access
was granted to the extent the date is knowable;
(B) a list of every entity that submits an access request for a reserve
bank master account and services after enactment of this section (or
that has submitted an access request that is pending on December 23,
2022), including whether, and the dates on which, a request--
(i) was submitted; and
(ii) was approved, rejected, pending, or withdrawn; and
(C) for each list described in subparagraph (A) or (B), the type of
entity that holds or submitted an access request for a reserve bank
master account and services, including whether such entity is--
(i) an insured depository institution, as defined in section
1813 of this title;
(ii) an insured credit union, as defined in section 1752 of this
title; or
(iii) a depository institution that is not an insured depository
institution or an insured credit union.
Id. § 248c(b)(1) (emphasis added). Defendants argue, and we agree, that, “by its
plain terms, the law specifically contemplates that requests for master accounts”
logical subset of the opinions of the other two panel judges, so it does not produce a
determinate holding.
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from depository institutions that are not insured, like Custodia, may be rejected.
(J.A. 492)
2. Analysis
We begin with § 342. As we read this provision, § 342 grants Reserve Banks
the authority to issue master accounts, using the term “may,” which makes this
authority discretionary. Though the statute does not expressly mention accounts
(“master” or otherwise), a Reserve Bank’s authority to open a master account has
always been implied from the authority to receive deposits—which comes from
§ 342—because a master account is necessary to hold any such funds received. See
Banco San Juan Internacional, Inc. v. Fed. Rsrv. Bank of N.Y., 762 F. Supp. 3d 247,
266 (S.D.N.Y. 2025) (“Section [342] governs master accounts.”). And the Supreme
Court has confirmed what the ordinary meaning of the word “may” in § 342 suggests:
the authority to receive deposits is discretionary. See Farmers’ & Merchants’ Bank
of Monroe v. Fed. Rsrv. Bank of Richmond, 262 U.S. 649, 662 (1923) (“[N]either
section [342], nor any other provision of the Federal Reserve Act, imposes upon
reserve banks any obligation to receive checks for collection. The act merely confers
authority to do so.”). It follows that a Reserve Bank’s authority to open an account
to receive such funds is also discretionary. See Banco San Juan Internacional, 762 F.
Supp. 3d at 266–67. To be sure, opening an account and receiving deposits into that
account are not precisely the same thing. But it makes little sense to suggest that a
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Reserve Bank would be obligated to open an account but then have discretion to
render that account useless by rejecting all deposits into it.
Next, the single sentence tucked deep and innocuously inside § 248a of the
MCA does not override the discretionary authority that Congress granted to Reserve
Banks in § 342 of the FRA. First, the plain language of § 248a says nothing about
master account access nor the authority of Reserve Banks to establish or to decline to
establish any kind of account, nor even the ability of a Reserve Bank to receive
funds. Rather, § 248a is concerned with an entirely different subject—the pricing of
services. And subsection (c)(2) simply provides that those services must be provided
to both member and nonmember banks on equal terms and with nondiscriminatory
pricing. See Banco San Juan Internacional, 762 F. Supp. 3d at 269 (“[A]ny pricing
and service terms must not discriminate between members and nonmembers based on
their membership status. Section 248a, however, is wholly silent as to how Federal
Reserve banks should evaluate . . . a depository institution’s initial . . . request for
Federal Reserve bank services.”).
Compellingly, § 248a is not even directed to Reserve Banks, which have the
authority to grant or deny master accounts. See 12 U.S.C. § 248a(a) (“[T]he Board
shall publish . . . a proposed schedule of fees . . . .”) (emphasis added). Rather, it is
addressed to the Board; and the Board does not make master account access
decisions—Reserve Banks do. The items listed in subsection (c)(2) are simply
pricing principles that the Board must adhere to when establishing the schedule of
fees. Id. § 248a(c) (“The schedule of fees . . . shall be based on the following
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principles: . . .”). Thus, this provision prescribing how the Board must go about
pricing services says nothing about account access, which is controlled by Reserve
Banks. As the district court observed, “[t]he plain language Congress employed in
12 U.S.C. § 248a does not expressly require anything from or provide instruction to
the Federal Reserve Banks.” Custodia Bank, 728 F. Supp. 3d at 1242.
Second, Congress “does not alter the fundamental details of a regulatory
scheme in vague terms or ancillary provisions—it does not, one might say, hide
elephants in mouseholes.” Whitman v. Am. Trucking Ass’ns, 531 U.S. 457, 468
(2001). To conclude that Congress removed Reserve Bank discretion over master
account access in a clause tucked away in a list of principles for the Board (rather
than Reserve Banks) to follow in pricing services would be akin to finding an
elephant in a mousehole. From the enactment of the FRA in 1913 until the enactment
of the MCA in 1980, the only arguable authority for issuing accounts came from
§ 342, which provides that such authority is discretionary. “Accepting Custodia’s
contention here would mean that Congress, in the [MCA] in 1980, greatly altered the
details of the regulatory scheme first initiated in 1913 by requiring Federal Reserve
Banks to provide master accounts to all eligible depository institutions requesting
one, and also that Congress did so in a provision (and a subchapter) directed at the
Board of Governors and without expressly saying as much.” Custodia Bank, 728 F.
Supp. 3d at 1244.
We find it particularly unlikely that Congress intended to depart from the
discretion afforded by § 342 when, in the MCA, Congress amended § 342 but
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retained its discretionary nature. The MCA’s amendment to § 342 demonstrates that
Congress considered the issue of nonmember banks making deposits to use Fed
services, knew the receipt of deposits was a discretionary action on the part of
Reserve Banks, see Farmers’ & Merchants’ Bank, 262 U.S. at 662, 15 and chose to
leave that discretion unchanged. It would make no sense for Congress
simultaneously to remove that discretion in an isolated clause of a separate provision
directed at a different entity (the Board).
Third, the plain language of § 248a(c)(2) does not say that services must be
available to all nonmember depository institutions, just that they must be available to
nonmember depository institutions in general, as a class. In the very same sentence,
Congress chose to use the word “all” before “Federal Reserve Bank services,” but
omitted it before “nonmember depository institutions.” As the district court
observed, this “signal[s] [Congress] intended to treat the two phrases differently.”
Custodia Bank, 728 F. Supp. 3d at 1243. Indeed, Congress’s repeated use of
qualifiers with respect to the term “depository institution(s)” in the FRA and MCA
suggests it was intentional with such usage. For instance, later in § 248a, Congress
refers to “[a]ll depository institutions.” 12 U.S.C. § 248a(e). Similarly, § 461, which
establishes the reserve requirements applicable to depository institutions, uses
modifiers such as “all” and “every” when referring to depository institutions. See id.
15
“We generally presume that Congress is knowledgeable about existing law
pertinent to the legislation it enacts.” Goodyear Atomic Corp. v. Miller, 486 U.S.
174, 184–85 (1988).
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§ 461(b)(2)(D) (“Any reserve requirement imposed under this subsection shall be
uniformly applied to all transaction accounts at all depository institutions.”); id.
§ 461(b)(4)(A) (“The Board may . . . impose a supplemental reserve requirement on
every depository institution.”). In contrast, § 248a(c)(2), notably, does not refer to
“all” or “every” nonmember depository institution, just nonmember depository
institutions as a class. That services shall be available to nonmembers as a class does
not automatically entitle each nonmember to a master account. 16
Finally, the Toomey Amendment underlines our conclusion that Congress
envisioned that Reserve Banks would reject some master account applications from
eligible entities. The Toomey Amendment amended the FRA and MCA to require
the Board to maintain a public database listing every application for a master account
and whether the application was “approved, rejected, pending, or withdrawn.” 12
U.S.C. § 248c(b)(1). The Board must also specify whether each applicant is one of
three entity types: (i) “an insured depository institution”, (ii) “an insured credit
union”, or (iii) “a depository institution that is not an insured depository institution or
an insured credit union.” Id. § 248c(b)(1)(C). Crucially, each of those entity types is
16
The MCA’s history underscores this understanding. Before 1980, Reserve
Banks needed to be told to make payment services available to nonmember
depository institutions as a class. Just as in the nineteenth century, if a law school
was instructed that admission “shall be available to women who had graduated from
college,” that would mean the law school should consider women just as they
considered men, but it would not mean that every woman who graduated college and
applied got into that law school. The need to change prior practice demonstrates that
the purpose of including this provision was to open up eligibility to a class that had
been categorically denied, not the more drastic change to create an absolute,
nondiscretionary entitlement to enrollment for every applicant.
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eligible for a master account. See supra note 4. Thus, Congress expressly addressed
only eligible entities, yet still anticipated Reserve Banks could reject such
applications. 17
For these reasons, we conclude the plain language of the three statutory
provisions grants Reserve Banks the discretion to reject master account applications
from eligible entities.
C. Even if the statutes were considered ambiguous, we would reach the
same conclusion
Even if we were to find these statutes ambiguous, expanding our inquiry would
lead to the same result. First, our interpretation is reinforced by each clause’s
placement in the statutory scheme. The title of § 248a, which Custodia relies on, is
“Pricing of services,” suggesting that § 248a(c)(2) is concerned not with mandating
access, but pricing. See Pub. L. No. 96-221, § 107, 94 Stat. 132, 140–41 (1980).
And the provision is located in a subchapter entitled “Board of Governors of the
Federal Reserve System,” reinforcing that it is directed to the Board, not Reserve
Banks, which have the authority to grant or deny an application for a master account.
In contrast, § 342, which directly supports the position of Defendant-Appellee
17
The dissent’s argument is that the Toomey Amendment did not evidence
Congress’ expectation and approval of Reserve Banks rejecting some applications;
rather, argues the dissent, Congress suspected Reserve Banks were improperly
rejecting applications, despite Congress’ intention that the banks should have no
discretion to reject any such applications, and Congress wanted to monitor when this
was happening. But it would seem oddly indirect for Congress, if it intended for
Reserve Banks to approve all applications without discretion, to amend the statute
simply to monitor these wrongful rejections instead of directly instructing the
Reserve Banks to approve all eligible applications.
34
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FRBKC, is found in a subchapter entitled “Powers and Duties of Federal Reserve
Banks,” which is precisely the issue presented in this appeal.
Furthermore, while we have already explained that the plain language of
§ 248a(c)(2) demonstrates it is a pricing principle rather than an access command,
this conclusion is reinforced by looking at the other pricing principles listed in
§ 248a(c). The canon of noscitur a sociis—literally, “a word is known by the
company it keeps”—can be employed by courts to clarify the meaning of ambiguous
words and phrases by reference to other associated words and phrases. See Yates v.
United States, 574 U.S. 528, 543 (2015); 2A Sutherland Statutes and Statutory
Construction § 47:16 (7th ed. 2007). The canon encourages reading ambiguous
phrases in context to “limit the disruptive potential of overly broad or general terms
in a statute,” NISH v. Rumsfeld, 348 F.3d 1263, 1267 (10th Cir. 2003), and to “avoid
the giving of unintended breadth to the Acts of Congress,” Jarecki v. G. D. Searle &
Co., 367 U.S. 303, 307 (1961). Here, each of the other three items listed in § 248a(c)
is clearly related to pricing, rather than scope of power. See 12 U.S.C. § 248a(c)(1)
(providing that services “shall be priced explicitly”); id. § 248a(c)(3) (providing that
pricing must account for all costs actually incurred in providing services as well as
the taxes and return on capital that a private business firm would have for providing
those same services); id. § 248a(c)(4) (specifying the interest rate for items credited
prior to collection). This suggests that the “shall be available” clause in § 248a(c)(2)
is also a pricing principle, not a master account access mandate.
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D. Contrary arguments raised by Custodia are not availing
Custodia raises several arguments against our conclusion, but none are
availing. First, Custodia argues our interpretation renders the “services . . . shall be
available to nonmember depository institutions” clause in § 248a(c)(2) meaningless.
But a look at the context in which Congress passed the MCA reveals the clause’s
class-based meaning: it directs the Board to ensure that the services enumerated in
§ 248a(b) are available to both classes of depository institutions, member and
nonmember. Prior to the enactment of the MCA, only member banks were subject to
a federal (as opposed to state) reserve asset requirement. This imposed opportunity
costs on member banks because they could not earn interest on their reserve amounts.
See Domestic Monetary Policy Report at 10. As a form of partial compensation for
member banks shouldering this burden, the Fed provided services to those banks free
of charge. Gary C. Zimmerman, The Pricing of Federal Reserve Services Under the
MCA, Econ. Rev., Winter 1981, at 23 (1981). As a policy, the Fed did not provide
most services to nonmember banks. Id. at 22.
As interest rates rose in the 1970’s, this arrangement became less appealing to
member banks, as the reserve requirements forced them to forgo the higher profits
available if they could have invested their reserves. Domestic Monetary Policy
Report at 10. Member banks began leaving the Fed, impairing the Fed’s ability to
effectuate its monetary policy. Id.
Congress passed the MCA, in part, to stem the tide of banks withdrawing their
membership. It did so by imposing reserve requirements on all banks, both member
36
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and nonmember, thus eliminating the financial incentive to withdraw from Fed
membership. To make the imposition of a reserve requirement more palatable to
nonmember institutions, Congress also lowered the amount of funds required to be
held in reserve and opened access to Fed services to nonmember institutions. See id.
at 11 (“In return for the posting of reserves, non-member institutions were given
access to Federal Reserve . . . services.”). However, it was expected that the reduced
revenue from lower reserve requirements and the increase in use of Fed services
would lead to a significant reduction in Fed earnings and, consequently, the federal
Treasury. 18 Id. Congress addressed these concerns in § 248a by directing the Fed to
charge for its services. See Domestic Monetary Policy Report at 11.
With this context in mind, § 248a(c)(2) has clear meaning without reading it to
remove Reserve Bank discretion to approve or reject a master account application: it
simply generally directs the Board to open access to Fed services to both classes of
institutions, members and nonmembers. And the Board has done just that. Services
are widely available to nearly all nonmember depository institutions. Yet that
general motive did not mean that Congress intended to eliminate all discretion by the
Reserve Banks to regulate the authorization of master accounts, which remained, as
18
Moreover, there were concerns that increased availability of the Fed’s free
services would stifle private sector competition in the provision of those services.
Id.; Anatoli Kuprianov, The Monetary Control Act and the Role of the Federal
Reserve in the Interbank Clearing Market, Federal Reserve Bank of Richmond 33
(July/Aug. 1985).
37
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before, an essential arrow in the Reserve Bank’s quiver of arrows to keep the banking
system safe and sound. 19
Second, Custodia argues that the lack of the word “all” before “nonmember
depository institutions” is not probative of congressional intent and § 248a(c)(2)
“would have the same meaning regardless of whether the word ‘all’ preceded the
phrase ‘nonmember depository institutions.’” Fourth Corner, 861 F.3d at 1069 (Op.
of Bacharach, J.). Custodia reasons that the word “all” placed before “nonmember
depository institutions” would be an indefinite adjective. Id. (citing Bryan A.
Garner, The Chicago Guide to Grammar, Usage, and Punctuation 60 (2016)). And
drafters of statutes are often advised to use indefinite adjectives only when necessary.
See William P. Statsky, Legislative Analysis and Drafting 184 (2d ed. 1984).
Therefore, Custodia argues, we should not read any significance into the absence of
such an adjective. 20
19
To make its point, the dissent suggests the statute should be rewritten, but
that is not only beyond the power of the courts, it is also an implicit recognition that
the original language used by Congress does not support the position that nonmember
depository institutions have an absolute right to a master account.
20
The dissent accepts Custodia’s reading of § 248a(c)(2), suggesting that
despite not including the word “all,” Congress meant that all nonmember depository
institutions would have nondiscretionary access to master accounts, rather than just
that such language qualified nonmember depository institutions for eligibility to
apply for master account access. The analogy the dissent draws actually makes clear
why its conclusion is errant. As the dissent says, the statements “ducks are birds”
and “all ducks are birds” are equivalent. Without including the word “all,” there
would still be no question that it was implied—adding “all” would be superfluous
because it would not change the statement’s meaning. To the contrary, in the context
of distinguishing between services being available to nonmembers as a class and
being automatically granted to every nonmember, if “all” had been included (which it
wasn’t), it would carry significant meaning, such that we doubt Congress would leave
38
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While this general guidance might be relevant in certain cases, it is clear
Congress did not follow this principle in § 248a. As noted earlier, Congress started
the very sentence Custodia relies on with “[a]ll Federal Reserve bank services.” 12
U.S.C. § 248a(c)(2) (emphasis added). And later in the same provision, Congress
refers to “[a]ll depository institutions.” Id. § 248a(e). Congress was deliberate with
its use of “all” in this provision, and we find it probative of Congress’s intent that it
chose not to use “all” before “nonmember depository institutions.”
Third, Custodia argues our interpretation is contradicted by statements in the
legislative history that describe the MCA as providing “open access to [Fed] services
to all depository institutions on the same terms and conditions as member banks.”
H.R. Rep. No. 96-842, at 71 (1980) (Conf. Rep.); see also id. at 69; 126 Cong. Rec.
7072 (1980). But these statements do not clearly address the question presented in
this case. These statements do not evince any intention to establish unregulated
master account access to nonmember depository institutions. Rather, they simply
reinforce the statutory language prohibiting discrimination against nonmembers in
pricing and service terms. 21
Fourth, Custodia points to statements by the Board and various Reserve Banks
as evidence that Defendants have historically understood the MCA to mandate an
it out if Congress had intended that all qualifying banks would automatically get
access to master accounts. There is no reason to think Congress intended to expand
the meaning of this provision so drastically.
21
Indeed, Custodia’s position would elevate nonmembers above members,
granting them guaranteed unencumbered access to the exchange of funds when
member banks do not have such a privilege.
39
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unregulated absolute right of nonmember institutions to establish a master account.
Custodia argues that Defendants are claiming a newly discovered power that conflicts
with their longstanding interpretation and that should, therefore, be viewed with
skepticism. Not only is this contention contradicted by the record, but, as with the
legislative history from Congress, the statements cited by Custodia shed little light on
the question presented in this case.
The Fed’s historical practices demonstrate that it has always understood that it
had the authority to protect its payment systems from risk. 22 The view advanced by
Custodia creates a danger of Reserve Banks having no discretion with respect to
master account access, thereby impairing the Reserve Bank’s ability to carry out their
duty to safeguard our financial system from risky institutions. But the Fed’s
discretion to protect the financial system is long established. See 12 U.S.C § 248;
United States v. Wells Fargo & Co., 943 F.3d 588, 600 (2d Cir. 2019) (noting that
Reserve Banks “operate in the public interest, and, specifically, in furtherance of [the
Federal Reserve] system’s functions of . . . promoting the stability of the financial
system, promoting the soundness of individual financial institutions, [and] fostering
payment and settlement system safety”); cf. Trump v. Wilcox, 145 S. Ct. 1415, 1415
22
We recognize that, until recently, the Fed has generally not exercised its
discretion to deny account access. See Hill, supra, at 463. But it has also not been
faced with access requests from novel institutions like Custodia. Custodia lacks both
federal insurance and a federal supervisor. As of November 2023, 540 institutions
held master accounts with FRBKC, and only one of them lacked both federal
insurance and a federal supervisor. And the one outlier was a century-old institution
that had insurance and a federal supervisor when it first received its account.
40
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(2025) (“The Federal Reserve . . . follows in the distinct historical tradition of the
First and Second Banks of the United States.”). For example, in 1985 the Fed adopted
policies governing the use of its wire transfer service, Fedwire, that evinced the
Board’s view that it had the authority to deny access to services—even those
expressly listed in § 248a(b)—to an individual institution based on its assessment of
that institution’s risk to the system.
Similarly, since master accounts were first established in 1998, the Fed’s
official master account policy, contained in Operating Circular 1, has consistently
stated that Reserve Banks have discretion with respect to master account access. See
Fed. Rsrv. Fin. Servs., Federal Reserve Banks Operating Circular 1: Account
Relationships § 2.3 (eff. Jan. 2, 1998) (“All master accounts are subject to Reserve
Bank approval.”); Fed. Rsrv. Fin. Servs., Federal Reserve Banks Operating Circular
1: Account Relationships § 2.6 (eff. Sept. 1, 2023) (“A Reserve Bank has discretion
in deciding whether to provide a Financial Institution with access to a Master
Account and may require a Financial Institution to provide additional information
and documentation to the Reserve Bank to support its decision making.”).
Custodia refers to numerous statements that describe the MCA as directing the
Board to make Fed services “available to all depository institutions.” Federal
Reserve Bank Services; Proposed Fee Schedules and Pricing Principles, 45 Fed. Reg.
58,689, 58,690 (Sept. 4, 1980); see also Fourth Corner, 861 F.3d at 1070–72 (Op. of
Bacharach, J.) (citing additional statements by the Fed). When read in the context
described above, however, these statements say nothing about any congressional
41
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intent to remove Reserve Bank discretion over access for individual entities deemed
risky. Indeed, any such change would be breathtaking in scope, limiting Reserve
Banks’ regulatory authority to ensure the safety of the banking system. We read the
MCA to direct the Board to make Fed services generally available to all depository
institutions, as opposed to restricting the availability of services generally to member
institutions only. And statements about services being “available to all depository
institutions” are perfectly consistent with this understanding of the statute. Custodia
points to no statements that actually touch on the issue of discretion with respect to
individual entities.
The same is true of the federal cases and academic commentary cited by
Custodia. See Greater Buffalo Press, Inc. v. Fed. Rsrv. Bank of N.Y., 866 F.2d 38,
40 (2d Cir. 1989) (stating that the MCA made “check clearing services . . . available
to all banks, regardless of whether or not they were member banks”); Jet Courier
Servs., Inc. v. Fed. Rsrv. Bank of Atlanta, 713 F.2d 1221, 1222-23 (6th Cir. 1983)
(stating that, pursuant to the MCA, “services . . . formerly provided to member banks
only will be available to all banks, regardless of whether or not they are members”);
Elijah Brewer III, The Depository Institutions Deregulation and Monetary Control
Act of 1980, Econ. Perspectives, Sept.–Oct. 1980, at 3–4 (stating that the MCA
requires the Fed to “grant all depository institutions access to [Federal Reserve]
services”); Fourth Corner, 861 F.3d at 1073 (Op. of Bacharach, J.) (citing other
academic commentary). Each of these statements says only that the MCA directed
42
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the Board to stop discriminating against nonmember banks as a group; it says nothing
about discretion to deny access to individual entities.
In fact, the only courts to have specifically decided the issue presented in this
case have concluded, as we do, that Reserve Banks have discretion to deny master
account access to particular eligible entities. See Banco San Juan Internacional, 762
F. Supp. 3d at 268 (“No FRA provision instructs Federal Reserve banks to provide all
available services to all depository institutions while ignoring any and all risk factors
pertaining to individual applicants for such services.” (emphasis in original));
PayServices Bank v. Fed. Rsrv. Bank of S.F., 2024 WL 1347094, at *11 (D. Idaho
Mar. 30, 2024) (unreported) (“[Section] 342 makes clear that Federal Reserve Banks
are authorized to accept deposits, and thus open master accounts. Critically,
however, they are not required to do so. Nothing in § 248a(c)(2) upends this
discretion.”).
Fifth, Custodia argues that the Toomey Amendment is solely about
transparency in the master account application process and says nothing about
substantive authority to reject individual applications. 23 Custodia explains that
applications can be rejected on the basis that the applicant is not legally eligible for
an account (i.e., not a depository institution), so the Amendment’s acknowledgement
23
This argument is supported by amici who were among the drafters of the
Toomey Amendment. But post-enactment statements of the subjective intent of some
drafters cannot override the plain language enacted by Congress. See Bostock v.
Clayton Cnty., 590 U.S. 644, 653 (2020) (“[T]he limits of the drafters’ imagination
supply no reason to ignore the law’s demands. When the express terms of a statute
give us one answer and extratextual considerations suggest another, it’s no contest.”).
43
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of rejections says nothing about rejecting applications from eligible entities. But this
ignores the fact that Congress in the Toomey Amendment expressly required the
Board to list the “type of entity” which was denied a master account, and it provided
three possible groups of entities, each of which were categories of entities who, as a
category, were legally eligible for master accounts. Thus, the plain text of § 248c
contemplates the rejection of master account access requests from eligible entities.
Sixth, Custodia contends that the canon of constitutional avoidance counsels
against our conclusion. Specifically, Custodia argues that, if Reserve Banks have
discretion to deny master account access to eligible entities, then such a statutory
scheme violates (1) the Due Process Clause and (2) the Appointments Clause of the
U.S. Constitution. Custodia raised these same arguments to the district court as
stand-alone claims in its original complaint. The district court dismissed them both
under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim, reasoning
that Custodia had not pled plausible violations of either clause.
Custodia first contends that, if FRBKC has discretion to deny master account
access to eligible entities, then such decision-making authority violates the Due
Process Clause by vesting FRBKC’s board of directors, which is largely chosen by
and partially composed of self-interested executives from competitor banks, with
regulatory authority over Custodia. 24 See Ass’n of Am. Railroads v. U.S. Dep’t of
24
Specifically, a Reserve Bank’s nine-member board is made up of three
classes of directors with three directors in each class. 12 U.S.C. § 302. Class A
directors are representatives of member banks. Id. Class B and Class C directors are
“elected to represent the public” and cannot be representatives of member banks. Id.;
44
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Transp., 821 F.3d 19, 27 (D.C. Cir. 2016). We agree with the district court that this
system raises no due process concerns because master account application decisions
are made by a Reserve Bank’s president, not its board, and Reserve Bank presidents
are elected only by those directors who are not representatives of competitors. See
12 U.S.C. §§ 302, 303, 341. 25
As for Custodia’s Appointments Clause argument, that was waived. Custodia
raised this argument in its initial complaint. That claim was then dismissed by the
district court, and Custodia did not reassert it in its amended complaint after that
dismissal.
We have previously explained that “we do not require a party to reallege a
cause of action on which the district court has conclusively ruled” in order to
preserve a claim for appellate review. Davis v. TXO Prod. Corp., 929 F.2d 1515,
1518 (10th Cir. 1991). However, a plaintiff waives its “objections to the ruling of the
court on indefiniteness, incompleteness or insufficiency, or more technical defects in
pleadings” by failing to re-assert a claim in an amended complaint. Id. at 1517–18.
id. § 303. Class A and Class B directors are elected by the Reserve Bank’s member
banks, while Class C directors are chosen by the Board. Id. § 302.
25
Another potential problem for Custodia in raising this claim is that Custodia
must first establish that it has a property or liberty interest in a master account before
it can show a due process violation. See Martin Marietta Materials, Inc. v. Kansas
Dep’t of Transp., 810 F.3d 1161, 1171–72 (10th Cir. 2016) (“To be entitled to
procedural due process, [Custodia] must prove it has either a protected property or
liberty interest.”). Defendants make this argument. (Aple. Bd. Br. 63–64.) Because
we conclude Custodia has no statutory entitlement to a master account, Custodia may
be unable to establish such a liberty or property interest. See Martin Marietta, 810
F.3d at 1178 (explaining that there is no liberty or property interest where the
outcome of the process is within the governing body’s discretion).
45
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In dismissing Custodia’s Appointments Clause claim in this case, the district
court concluded that (1) “the factual allegations in Custodia’s complaint support that”
it is a Reserve Bank’s president, not the board, that makes master account application
decisions (J.A. 384); and (2) the appointment process for Reserve Bank presidents
does not violate the Appointments Clause. Despite having the opportunity to reassert
its claim that the appointment of Reserve Bank directors violates the Appointments
Clause by adding factual allegations to its subsequent amended complaint, Custodia
did not do so. Because the district court dismissed Custodia’s argument about the
appointment process for directors on the ground that the factual allegations were
insufficient to implicate directors, Custodia waived its argument about the directors
by failing to re-assert it in its amended complaint. See Davis, 929 F.2d at 1517–18.
Instead, Custodia proceeded to seek to compel FRBKC’s president to grant it an
account and never mention Appointments Clause issues in any of the remaining
proceedings in the district court.
To the extent Custodia now argues that the appointment process for a Reserve
Bank president violates the Appointments Clause—an argument that was
“conclusively ruled” on by the district court—Custodia has also waived that
argument by failing adequately to brief it on appeal. See United States v. Cooper,
654 F.3d 1104, 1128 (10th Cir. 2011) (“It is well-settled that ‘[a]rguments
inadequately briefed in the opening brief are waived.’” (quoting Adler v. Wal-Mart
Stores, Inc., 144 F.3d 664, 679 (10th Cir. 1998)). Custodia’s Opening Brief raised
Appointments Clause concerns only with the appointment process for Reserve Bank
46
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directors. It never makes any mention of the appointment process for a Reserve
Bank’s president. Further, Custodia’s Reply Brief still fails to make any argument as
to how the appointment process for a Reserve Bank’s president violates the
Appointments Clause or why the district court’s conclusion to the contrary was
wrong. See Perry v. Woodward, 199 F.3d 1126, 1141 n.13 (10th Cir. 1999) (“This
court . . . will not craft a party’s arguments for him.”). We are unwilling to rely on
Custodia’s bare assertion of Appointments Clause concerns when (1) Defendants
were unable to respond to the argument due to Custodia’s inadequate briefing, and
(2) Custodia has not offered any explanation as to how the district court’s well-
reasoned analysis was wrong. 26
26
Custodia also finds it objectionable, from a policy perspective, for Reserve
Banks to have discretion to deny master account access. But Custodia does not
establish that any such discretion violated any constitutional provisions, nor that such
discretion was abused in this case. Further, Custodia’s policy concerns are more than
counterbalanced by the comparable danger of Reserve Banks having no discretion
with respect to master account access and therefore no ability to carry out their duty
to safeguard our financial system from risky institutions. See United States v. Wells
Fargo & Co., 943 F.3d 588, 600 (2d Cir. 2019) (noting that Reserve Banks “operate
in the public interest, and, specifically, in furtherance of [the Federal Reserve]
system’s functions of . . . promoting the stability of the financial system, promoting
the soundness of individual financial institutions, [and] fostering payment and
settlement system safety”). In the end, we simply follow the text, which directs our
holding in this case.
47
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V. CONCLUSION
We agree with the district court that “[t]he plain language of the relevant
statutes can only reasonably be read to give the Federal Reserve Banks discretion in
granting or denying requests for master accounts.” Custodia Bank, 728 F. Supp. 3d
at 1245. Accordingly, we hold that Custodia is not statutorily and automatically
entitled to a master account. We AFFIRM the district court’s judgment in favor of
Defendants on all claims.
48
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24-8024, Custodia Bank, Inc. v. Federal Reserve Board of Governors; Federal Reserve
Bank of Kansas City
TYMKOVICH, Circuit Judge, dissenting.
The Federal Reserve and its predecessors, the First and Second Banks of the
United States, have tested the boundaries of our constitutional order since the
founding. No lesser men than Alexander Hamilton and Thomas Jefferson debated the
necessity and legality of a national bank to implement America’s monetary policy.
The Fed has proven an important part of America’s economic policy, but still, it
exists on the boundaries of our tripartite system. By claiming unreviewable
discretion over access to the nation’s financial system, the Fed has gone too far.
In adopting the Fed’s interpretation of the law, the majority endorses a reading
of federal law that allows unappointed bank officials to exercise significant yet
unreviewable executive authority. I doubt our Constitution allows that, and I think
the solution here is simpler. Through the Depository Institutions Deregulation and
Monetary Control Act (MCA), Congress mandated access for all nonmember
depository institutions. This interpretation is more faithful to the MCA’s plain text
and skirts an avoidable constitutional quagmire.
I would reverse.
Appellate Case: 24-8024 Document: 167 Date Filed: 10/31/2025 Page: 50
I. Background
A. History and Structure of the Federal Reserve
In all its forms, the central bank of the United States has faced legal and
political challenges. Some of our nation’s earliest and most important debates
surrounded the Fed’s predecessors. These debates still echo through this case.
1. The First and Second National Banks
The First Bank of the United States was chartered in 1791 amid political and
legal controversy. The First Bank, like the modern regional Federal Reserve Banks,
was quasi-private. The federal government appointed five directors and private
shareholders appointed twenty more. Alexander Hamilton proposed the bank and
argued it was the cornerstone of a strong national economy and necessary to cement
the states into a national bond. See Bray Hammond, Banks and Politics in America:
From the Revolution to the Civil War 114–15 (1957). Thomas Jefferson believed that
the Bank was not only unnecessary, but a dangerous and unconstitutional expansion
of federal power. Id. at 117. As to the constitutional question, James Madison and
Attorney General Edmund Randolph agreed with Jefferson. Id. at 115–17. The
factions that formed in this debate outlined America’s first political parties.
The Second Bank of the United States was chartered in 1816. Once again, the
President appointed five of the bank’s twenty-five directors. This time, challenges to
the bank’s constitutionality made it to the Supreme Court. Chief Justice Marshall
agreed with Hamilton and ruled that the Constitution’s Necessary and Proper Clause
gave Congress the authority to charter and administer a national bank. See
2
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McCulloch v. Maryland, 17 U.S. 316, 353 (1819). But that did not save the Second
Bank from political controversy. Eventually, President Andrew Jackson, still
believing the Second Bank was unconstitutional, vetoed legislation to renew the
Second Bank’s charter. Disagreements over the constitutionality of the national bank
firmed the lines between the Whigs, Republicans, and Democrats.
2. The Federal Reserve System
The modern Federal Reserve System began in 1913 when Congress passed the
Federal Reserve Act. 12 U.S.C. § 221 et seq. The FRA created twelve regional
Reserve Banks and a Federal Reserve Board in Washington, D.C. Congress later
added the Federal Open Market Committee (FOMC), completing the Federal Reserve
System.
The Federal Reserve Board, now called the Board of Governors, is not itself a
bank, but an independent federal agency made up of seven members appointed by the
President and confirmed by the Senate. The Board oversees the twelve regional
banks and guides their day-to-day activities through notice-and-comment rulemaking.
See generally 12 U.S.C. § 248.
The regional banks each serve as a “bank for banks” in their region. They hold
deposits, lend to member banks, and serve as the bank for the U.S. Treasury. Each
regional bank is run by a board of nine directors. Three A-Class directors and three
B-Class directors are chosen by the member banks—state and national banks who
own stock in their regional bank. Three C-Class directors are chosen by the Board of
Governors. The A-Class and B-Class directors elect a chair from the C-Class
3
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directors, subject to approval from the Board of Governors. The chair serves as the
president and chief executive of the regional bank, and serves as a rotating member
of the FOMC, the part of the Fed that sets the target federal funds rate and authorizes
open market operations to achieve it. 1 Once the regional bank president is chosen, he
can be removed by either the bank’s board of directors or the Board of Governors.
B. Master Accounts and Payment Services
The regional banks provide the banking services to banks in their region. The
Kansas City Fed serves District 10: Wyoming, Colorado, Nebraska, Kansas,
Oklahoma, and parts of New Mexico and Missouri. For member banks in those
states, the Kansas City Fed is their principal federal regulator, performing on-site
evaluations. The Kansas City Fed also holds deposits; lends short-term cash; issues,
transfers, and redeems government securities; and provides integral payment services
between banks.
The Federal Reserve payment services are essential to most bank business. In
fact, any time money moves from one bank to another, the Federal Reserve Banks are
involved. These payment services include wire transfer services, automated
clearinghouse services, check clearing services, and settlement services. As an
1
The FOMC is made up of the seven Governors and five regional bank
presidents—the New York Fed President has a permanent seat, and the other 11
banks rotate through the four seats. The FOMC is not relevant here except noting
that regional bank presidents serve on the committee.
4
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example, the Fed’s clearinghouse services allow companies to direct deposit their
employees’ paychecks. In 2024, Federal Reserve payment services processed more
than $4.5 trillion per day. Fedwire Funds Service – Annual Statistics, The Fed.
Rsrv., https://www.frbservices.org/resources/financial-services/wires/volume-value-
stats/annual-stats.html (last visited Oct. 10, 2025). Before the Fed provided these
services, banks had to move physical currency between themselves; now, the Fed
simply records credits and debits between the banks.
The Fed records all these transactions in a bank’s master account. Before
1998, some banks had multiple accounts with multiple regional banks. Then the Fed
consolidated all reserve and clearing accounts into a single master account. Master
accounts are the official records of banks’ rights and obligations to each other.
Settlement in a master account is the only way to settle a U.S. dollar transaction other
than the exchange of physical currency.
Master accounts, and the payment services accessible through them, are vital
for functioning banks. Without such access, a depository institution is merely a
vault. Without their own master accounts, banks can only access these services
through a correspondent banking relationship or expensive third-party service
providers. Without a master account, a bank’s business is “effectively crippl[ed].”
Fourth Corner Credit Union v. Fed. Rsrv. Bank of Kansas City, 861 F.3d 1052, 1053
(10th Cir. 2017) (Moritz, J., concurring).
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C. Custodia Bank
Unsurprisingly, Custodia Bank wants a master account. Custodia is a
Wyoming-chartered Special Purpose Depository Institution (SPDI; pronounced
“speedy”). Wyoming created SPDIs to encourage innovation in digital asset banking.
SPDIs specialize in digital asset management. 2 Under Wyoming law, they can
provide custodial services, asset servicing and management, and typical business
cash management. See Wyo. Stat. Ann. § 13-12-103(b) (2025). But they cannot loan
money and must keep 100% of reserves in cash or high-quality assets like treasury
bonds. Wyo. Stat. Ann. §§ 13-12-103(c), 105(a) (2025). Custodia’s goal as a SPDI
is to provide the full suite of banking services to the cryptocurrency industry.
Custodia wants not only to be a safe depository for digital assets like
cryptocurrencies, but also to provide traditional banking services to digital asset
companies.
To illustrate, consider a hypothetical company. HypoCo creates a new
hypothetical cryptocurrency, HypoCoin. Under Wyoming law, Custodia could
provide a safe depository for the company’s reserves of HypoCoin and, with a master
account, could facilitate HypoCo’s payroll services, bill payment, and large dollar
transfers for capital purchases. The two services would be completely separate, but
together would make Custodia a one-stop-shop for digital asset companies.
2
See generally Special Purpose Depository Institutions, Wyo. Div. of
Banking, https://wyomingbankingdivision.wyo.gov/banks-and-trust-
companies/special-purpose-depository-institutions (last visited Oct. 10, 2025).
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Custodia applied for a master account in October 2020. 3 At the time,
applications for a master account were done on a one-page form and, according to the
Fed, were usually processed in five to seven business days. Custodia’s took twenty-
seven months. Discovery revealed early optimism about Custodia’s application. The
Kansas City Fed told Custodia early on there were “no show-stoppers” in its
application. App. 1721–23.
The Kansas City Fed changed its tune over time. In August 2022, the Board of
Governors issued guidance to the regional banks for evaluating account and service
requests. Guidelines for Evaluating Account and Services Requests, 87 Fed. Reg.
51099 (Aug. 19, 2022). The guidelines list six principles for guiding access
decisions. Regarding the level of scrutiny the regional banks should apply, the
guidelines create a three-tiered review framework:
1. Tier 1: Eligible institutions that are federally insured . . .
2. Tier 2: Eligible institutions that are not federally insured
but are subject (by statute) to prudential supervision by
a federal banking agency. In addition, (i) if such an
institution is chartered under federal law, it has a holding
company that is subject to Federal Reserve oversight (by
statute or commitments); and (ii) if such an institution is
chartered under state law and has a holding company,
that holding company is subject to Federal Reserve
oversight (by statute or commitments) . . .
3. Tier 3: Eligible institutions that are not federally insured
and are not considered in Tier 2.
3
Custodia separately applied for membership in the Federal Reserve System
and Federal Deposit Insurance Corporation insurance.
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Id. at 51109–10. Custodia fell into Tier 3 and was subject to “the strictest level of
review.” Id. at 51110.
Then, in November 2022, FTX Trading Ltd., a fraudulent cryptocurrency
exchange company, failed. Shortly thereafter, the Board of Governors communicated
to the Kansas City Fed that Custodia’s application should be denied. The Kansas
City Fed sent the Board of Governors a draft denial letter, which the Board redlined
and returned.
On January 27, 2024, the Kansas City Fed sent Custodia the letter denying its
master account application. On the same day, the Board of Governors denied
Custodia’s membership application.
D. Custodia’s Lawsuit
Custodia filed suit before its application was denied. Its first complaint
alleged eight causes of action stemming from the Kansas City Fed’s inaction. The
Fed defendants moved to dismiss, but the district court declined to dismiss
Custodia’s Mandamus and APA claims.
After Custodia’s application was denied by the Kansas City Fed, it amended
its complaint and alleged three claims. First, Custodia alleges the Board of
Governors violated the APA by denying Custodia’s application in violation of the
Federal Reserve Act and the Monetary Control Act. Second, Custodia seeks relief
under the Mandamus Act to compel the Kansas City Fed to grant its application.
Finally, Custodia seeks declaratory relief that the Kansas City Fed and the Board of
Governors lack discretion to deny its application.
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The Fed defendants again moved to dismiss. In this motion, they conceded
that Custodia was legally eligible for a master account, but argued it is within their
(absolute) discretion to deny an application. The district court declined to dismiss
Custodia’s APA claim against the Board, its Mandamus claim against the Kansas
City Fed, and its declaratory relief claim.
After discovery, both Custodia and the Kansas City Fed moved for judgment
as a matter of law. This time, the district court ruled for the defendants. It
concluded, first, the APA claim against the Board of Governors failed for lack of
jurisdiction. It ruled that there was no final agency action and, so, no statutory
jurisdiction. Second, the district court found that Custodia was not entitled to
mandamus relief because the Kansas City Fed had discretion over whether to issue
master accounts under 12 U.S.C. § 342. Finally, the district court held its statutory
interpretation would also preclude relief for Custodia under the APA, even if it
possessed jurisdiction.
II. Discussion
This case, at its core, turns on statutory interpretation. No amount of policy
argument or economic theory changes the fundamental question: does the Kansas
City Fed have statutory discretion to deny a master account to a legally eligible
depository institution?
The text tells the story.
There is no single statute that covers master accounts so the parties each put
forth their own theory about what statutory provision controls. Custodia claims the
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Monetary Control Act (MCA) is a statutory command that requires a master account
“shall be available to nonmember depository institutions.” 12 U.S.C. § 248a(c)(2)
(emphasis added). On the other hand, the Kansas City Fed claims the Federal
Reserve Act (FRA), 28 U.S.C. § 342, has always given it discretion over accepting
deposits. It contends it would only make sense for it to have discretion over deposit
accounts. The Kansas City Fed bolsters its argument by claiming that a statute
passed in 2022, the Toomey Amendment, 12 U.S.C. § 248c, specifically recognizes
its ability to reject master account applications.
Custodia has the better reading of the MCA and that reading controls the
outcome. The Fed’s interpretation, adopted by the majority, is certainly plausible.
But what the majority calls “context,” I would dub misdirection. Section 248a’s text
is clear and we need go no further, although in context my interpretation avoids
significant constitutional problems. I start by interpreting the MCA and then address
the majority’s approach and concerns.
A. Interpreting the MCA
The MCA provides the clearest textual basis for Custodia’s claims. After all,
it says “[a]ll Federal Reserve bank services covered by the fee schedule shall be
available to nonmember depository institutions and such services shall be priced at
the same fee schedule applicable to member banks.” 12 U.S.C. § 248a(c)(2). This
isolated reading of the text is compelling. Before today, the only other Court of
Appeals judge to explicitly reach the issue (in a concurrence) found that § 248a
controls. Fourth Corner Credit Union, 861 F.3d at 1068 (Bacharach, J., concurring).
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In a case also arising in this circuit, Fourth Corner Credit Union v. Federal Reserve
Bank of Kansas City, Judge Bacharach, writing separately, concluded a credit union
hoping to service marijuana-related businesses was entitled to a master account. Id.
First, he concluded the district court should have presumed that Fourth Corner would
follow the law in line with its promises. Id. at 1065. Second, and relevant here, he
determined “§ 248a(c)(2) unambiguously entitles Fourth Corner to a master account.”
Id. at 1068 (emphasis added). Custodia argues that we should do the same. I agree.
First, it is undisputed that Custodia is eligible for a master account. Section
248a adopts its definition of “depository institution” from 12 U.S.C. § 461(b)(1). 12
U.S.C. § 248a(e). Custodia falls under § 461(b)(1)(A)(i): “any insured bank as
defined in section 3 of the Federal Deposit Insurance Act or any bank which is
eligible to make application to become an insured bank under section 5 of such Act.”
It is eligible to apply for insurance under the FDIA because it is a “state
bank . . . engaged in the business of receiving deposits, other than trust
funds . . . incorporated under the laws of [Wyoming].” 12 U.S.C. § 1813(2)(A)–(B);
see also Wyo. Stat. Ann. § 13-12-103(b)(vii)(E) (2025) (confirming SPDIs may
receive deposits under Wyoming law).
It is no trivial fact that Custodia falls under § 461’s broad definition.
Replacing “nonmember depository institutions” in § 248a with § 461(b)(1)(A)(i)’s
definition shows just how broadly § 248a(c)(2) was meant to sweep. The modified
statute reads, “[a]ll Federal Reserve bank services covered by the fee schedule shall
be available to [any bank which is eligible to make application to become an insured
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bank].” 12 U.S.C. § 248a(c)(2); § 461(b)(1)(A)(i) (emphasis added). Section 248a
sweeps broadly and covers Custodia.
Second, Custodia argues, as Judge Bacharach explained, that § 248a controls
access to master accounts. Section 248a covers an enumerated list of services:
(1) currency and coin services;
(2) check clearing and collection services;
(3) wire transfer services;
(4) automated clearinghouse services;
(5) settlement services;
(6) securities safekeeping services;
(7) Federal Reserve float; and
(8) any new services which the Federal Reserve System
offers, including but not limited to payment services to
effectuate the electronic transfer of funds.
12 U.S.C. § 248a(b)(1)–(8). Custodia argues that master accounts are either covered
by “any new services,” § 248a(b)(8), or are a prerequisite for those services. It
would then follow that regional banks cannot deny nonmember institutions a master
account without violating § 248a.
I find this interpretation compelling. None of the enumerated services are
“accounts,” master or otherwise. Nor does the Fed contend that it charges a fee for
master accounts as § 248a(c)(3) requires. See 28 U.S.C. § 248a(c)(3) (“Over the long
run, fees shall be established on the basis of all direct and indirect costs actually
incurred in providing the Federal Reserve services priced.”). It makes sense to think
of the master account as the means of accessing the services, not as an end in and of
itself. In Fourth Corner, both Judge Moritz and Judge Bacharach recognized that a
master account is required to access Fed services, and that the services are what the
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credit union wanted. See Fourth Corner Credit Union, 861 F.3d at 1053 (Moritz, J.,
concurring) (“A master account is, put simply, a bank account for banks. It gives
depository institutions access to the Federal Reserve System’s services, including its
electronic payments system. In the Credit Union’s words, ‘Without such access, a
depository institution is nothing more than a vault.’”); id. at 1071 (Bacharach, J.,
concurring) (“To purchase these services, a master account is required.”). Here too,
Custodia’s business model hinges on access to the payment services, not just a master
account.
The Fed defendants point out that a master account is not technically required
to access the payment systems. They argue that Custodia can access the payment
systems through a correspondent relationship with another bank by transacting
through that bank’s master account. But I am not persuaded that access through an
intermediary bank satisfies § 248a(c)(2). Relying on intermediaries (who may or
may not provide a long-term relationship) does not guarantee the uniform access to
payment services that the MCA intended.
Master accounts are necessary to access the payment systems. To deny a
financial institution a master account is to deny access to the payment systems. The
Kansas City Fed cannot get around statutorily mandated access to payment systems
by damming the river upstream.
Finally, Custodia asserts that § 248a(c)(2) contains two clear commands:
(1) provide universal access, and (2) at equal prices. I agree. The word “shall”
issues a command beyond the Fed’s discretion. See Lopez v. Davis, 531 U.S. 230,
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241 (2001) (“Congress used ‘shall’ to impose discretionless obligations . . . .”); see
also Maine Cmty. Health Options v. United States, 590 U.S. 296, 310 (2020)
(“Unlike the word ‘may,’ which implies discretion, the word ‘shall’ usually connotes
a requirement.”). The statute clearly states, “[a]ll Federal Reserve bank services
covered by the fee schedule shall be available to nonmember depository institutions
and such services shall be priced at the same fee schedule applicable to member
banks.” 12 U.S.C. § 248a(c)(2) (emphasis added). The plain reading of the statute is
that the two uses of “shall” create two nondiscretionary commands for the Kansas
City Fed. “If the statutory language is plain, we must enforce it according to its
terms.” King v. Burwell, 576 U.S. 473, 486 (2015). The first command, the one
Custodia is interested in, creates nondiscretionary access for nonmember depository
institutions. And the second requires the Fed to charge equal prices for those
services.
The Kansas City Fed’s alternative reading of this provision is unpersuasive. It
first argues that the only command in the statute is to price the services equally for
member and nonmember institutions. By adopting that reading, the majority reads
the phrase “shall be available to nonmember institutions” entirely out of the statute.
That, I’m convinced, we cannot do. See TRW Inc. v. Andrews, 534 U.S. 19, 31
(2001) (“It is ‘a cardinal principle of statutory construction’ that ‘a statute ought,
upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or
word shall be superfluous, void, or insignificant.’” (quoting Duncan v. Walker, 533
U.S. 167 (2001))). The sentence contains two commands—access and fair pricing.
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The Fed then invites us to zoom out and view the provision in broader context.
It argues that § 248a as a whole is only about the pricing of services and (c)(2) is not
a command for the Kansas City Fed, but a principle that the Board of Governors must
follow. First, it points to the heading of § 248a, “Pricing of services.” While the
headings in the U.S. Code are not law, they can provide context for the text’s
meaning. Merit Mgmt. Grp., LP v. FTI Consulting, Inc., 583 U.S. 366, 380 (2018)
(“Although section headings cannot limit the plain meaning of a statutory
text . . . ‘they supply cues’ as to what Congress intended.”). Plus, the provision is
directed at the Board of Governors. Section 248a(a) states “the Board shall publish
for public comment a set of pricing principles in accordance with this section” and
“the Board shall begin to put into effect a schedule of fees for such services which is
based on those principles.” Under this view, the 248a(c)(2) command is just a
principle for the Board of Governors to remember when pricing. The Fed finally
concludes, given this context, § 248a(c)(2) only requires access to nonmember
institutions as a class. They point out that the statute says, “all Federal Reserve
Bank Services,” but does not say “all” nonmember depository institutions. See 12
U.S.C. § 248a(c)(2) (emphasis added).
The majority accepts the Fed’s contextual interpretation; I would not. Context
does not override the plain text of the statute. Certainly, statutory titles and headings
can provide “cues”—but they are just that. Yates v. United States, 574 U.S. 528, 540
(2015). The plain meaning cannot be undone by headings and titles. Merit Mgmt.
Grp., LP, 583 U.S. at 380. True, § 248a(a) contains commands to the Board, but
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§ 248a(c)(2) is a clear principle of law. I find it strange to rule that the Board of
Governors is bound by that principle, but the Kansas City Fed is not. 4
Lastly, the presence or absence of “all” does not change the plain meaning of
the provision. I agree with Judge Bacharach in Fourth Corner that “the statute would
have the same meaning regardless of whether the word ‘all’ preceded the phrase
‘nonmember depository institutions.’” Fourth Corner Credit Union, 861 F.3d at 1069
(Bacharach, J., concurring). If Congress had included “all,” it would have been an
indefinite adjective. Id. (citing Bryan A. Garner, The Chicago Guide to Grammar,
Usage, and Punctuation 60 (2016)). Statutory drafters are often discouraged from
using pronominal indefinite adjectives unless necessary. As one commentator
advises:
a. Use adjectives such as “each,” “every,” “any,” “all,”
“no,” and “some” (technically known as “pronominal
indefinite adjectives”) only when necessary.
b. If the subject of the sentence is plural, it is almost never
necessary to use this kind of adjective.
William P. Statsky, Legislative Analysis and Drafting 184 (2d ed. 1984) (emphases
added). Pennsylvania codified this rule. 101 Pa. Code § 15.142(c). (“Use adjectives
such as ‘each,’ ‘every,’ ‘any,’ ‘all,’ ‘no,’ and ‘some’ (technically known as
‘pronominal indefinite adjectives’) only where necessary. If the subject of the
4
Recall that the Board of Governors regulates the regional banks but does not
provide the services. Applying the § 248a(c)(2) command only to the Board would
direct it away from the institution able to fulfill it. Plus, that would allow the Kansas
City Fed to do something the Board of Governors cannot permit it to do.
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sentence is plural, it is almost never necessary to use such an adjective”); see also
Fourth Corner Credit Union, 861 F.3d at 1069–70 (collecting corroborating sources).
Whether a speaker says, “all ducks are birds” or simply “ducks are birds,” we
would understand he means the same thing. Here too, the statute means every
nonmember depository institution shall have access. To mandate access to
nonmember institutions as a class but allow discretion over individual institutions
gives the Kansas City Fed license to ignore the statute by denying all nonmembers on
the back end.
The majority’s reading also renders the language superfluous. The MCA not
only created § 248a(c)(2), it also amended § 342. The amendments to § 342 added
“nonmember bank[s]” to the list of institutions from whom regional banks “may
receive . . . deposits.” 12 U.S.C. § 342; see infra Section II.B (explaining the MCA’s
amendments to § 342 in greater detail). Thus, reading § 248a(c)(2) as merely
opening access to nonmember banks would make it superfluous alongside § 342. See
TRW Inc., 534 U.S. at 31.
Section 248a(c)(2) contains a clear statutory command. The Federal Reserve
System’s payment services “shall be available to nonmember depository
institutions.” 12 U.S.C. § 248a(c)(2) (emphasis added). The plain meaning of this
provision is that the Kansas City Fed may not deny Custodia a master account
because doing so would unlawfully prevent it from accessing those services.
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B. The Majority’s Contextual Argument
Instead of starting with § 248a, the majority begins its analysis with a
provision of the Federal Reserve Act, 12 U.S.C. § 342. Section 342 provides that
“[a]ny Federal Reserve bank may receive from any of its member banks, or other
depository institutions, and from the United States, deposits of current funds in
lawful money . . . .” 12 U.S.C. § 342 (emphasis added). The Fed defendants argue,
and the majority agrees, that this gives them discretion over deposits and, by logical
extension, deposit accounts. Indeed, the Supreme Court “has repeatedly observed
that the word ‘may’ clearly connotes discretion.” Biden v. Texas, 597 U.S. 785, 787
(2022) (internal quotations omitted).
The Supreme Court explored the Fed’s discretion in Farmers’ & Merchants’
Bank of Monroe v. Federal Reserve Bank of Richmond, 262 U.S. 649 (1923). In that
case, the Court held that “neither section [342], nor any other provision of the
Federal Reserve Act, imposes upon Reserve Banks any obligation to receive checks
for collection. The act merely confers authority to do so.” Id. at 662. The majority
reads Farmers’ as confirmation that the Fed has broad discretion over deposits and
that includes deposit accounts. It also argues that statutory amendments have only
affirmed this discretion.
The history does not support this broad assertion. When the MCA was passed,
it made only minor amendments to § 342. In fact, one of the only changes was to add
“other depository institutions” to the list of parties it may receive deposits from.
Depository Institutions Deregulation and Monetary Control Act (MCA), Pub. L. No.
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96-221, § 105(a)(1), 94 Stat. 132, 139 (1980). Meanwhile, Congress placed § 248a in
a new section that is not linked to the discretion of regional banks. The Supreme
Court has noted that the FRA “appears to have been drawn with great care.
Throughout the Act Congress clearly distinguished between what the board and the
Reserve Banks ‘shall’ do and what they ‘may’ do.” Farmers’ & Merchants’ Bank of
Monroe, 262 U.S. at 663. The majority argues that if Congress had intended to limit
the bank’s discretion, it would have done so in the section granting that discretion.
Once again in 2022, Congress amended the FRA. This amendment, the
Toomey Amendment, also supports discretion in the majority’s eyes.
“The Board shall create and maintain a public, online, and
searchable database that contains . . . a list of every entity
that submits an access request for a reserve bank master
account and services after enactment of this section (or that
has submitted an access request that is pending on the date
of enactment of this section), including whether, and the
dates on which, a request . . . was approved, rejected,
pending, or withdrawn.”
12 U.S.C. § 248c(b)(1)(B)(ii). The majority believes that with this amendment,
Congress once again considered and blessed the Fed’s ability to reject master account
applications.
The majority’s overarching theory is that § 342 gives the Fed broad discretion
over deposits and Congress affirmed that discretion when it passed the MCA and the
Toomey Amendment. To find that Custodia has an absolute entitlement to a master
account based solely on § 248a(c)(2) would be squeezing an elephant into a
mousehole. Certainly, this argument has some merit. After all, this is how the
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district court in this case ruled, and two other district courts agreed. See PayServices
Bank v. Fed. Rsrv. Bank of S.F., No. 1:23-CV-00305-REP, 2024 WL 1347094 (D.
Idaho Mar. 30, 2024) (appeal docketed); see also Banco San Juan Internacional, Inc.
v. Fed. Rsrv. Bank of N.Y., 762 F. Supp. 3d 247 (S.D.N.Y. 2025).
But respectfully, I disagree. The discretion the majority identifies in § 342 is
not the heart of that statute. Section 342 is simply the background legal principle that
gives the regional banks legal authority to accept deposits—“words of authorization
merely.” Farmers’ & Merchants’ Bank of Monroe, 262 U.S. at 662. No doubt
Congress can pass additional laws changing the Fed’s discretion. It did so in 1916,
further allowing the Fed to accept deposits in maturing bills. See Federal Reserve
Act Amendments, Pub. L. No. 64-270, 39 Stat. 752 (1916). Section 248a limits the
Kansas City Fed’s discretion in light of § 342’s backdrop. I agree that the placement
of this provision is imperfect, but that does not make the statutory language any less
clear. Besides, as I explain below, the MCA is no mousehole.
Further, the Toomey Amendment does not affirm any powers of the Kansas
City Fed. In the majority’s view, the Toomey Amendment underlines its conclusion
that Congress expected the Fed would reject some master account applications. But I
do not believe the Amendment changed anything. Congress passed the Toomey
Amendment because it believed rejections were happening and merely wanted to
gather information. See Former Senator Patrick J. Toomey Amicus Br. 12 (“The
focus was consistently, and exclusively, on promoting transparency as to which
institutions held and had applied for master accounts.”); see also Members of the
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U.S. Senate Banking Committee and U.S. House Financial Services Committee
Amicus Br. 20 (“It is unreasonable to construe the Toomey Amendment as modifying
§ 248a(c)(2) or implying Congressional intent for § 342 to override the mandatory
language of § 248a(c)(2).”). I read the Toomey Amendment only to require
transparency in the existing framework. Whether the Fed denies a master account
because it believes a bank is statutorily ineligible, or is exercising unlawful
discretion, it must disclose its decision to the public.
The reading the Fed advances and the majority endorses is certainly a plausible
one, but it is not the best reading of the statute. The clear, unambiguous meaning of
“shall be available” cannot be explained away. 12 U.S.C. § 248a(c)(2).
C. Of Elephants and Mouseholes
An important influence on the majority’s constricting interpretation of § 248a
is its belief that Congress would not make a change to the Fed’s discretion in a
“single sentence tucked deep and innocuously inside . . . the MCA.” Majority Op.
30. In the majority’s view, limiting the Fed’s discretion risks financial instability by
inhibiting its ability to safeguard our financial system. Congress would not make
such a change in a relatively obscure statutory section—that would be like finding an
elephant in a mousehole. But the Fed has many tools in its belt to protect against
harmful banking practices; granting it unreviewable discretion over deposit accounts
would itself be an elephant that does not fit within the MCA mousehole. So this may
be the rare case in which there are two elephants and two mouseholes. Regardless of
the consequences, we must interpret the law.
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This case presents a choice between a nondiscretionary entitlement for
Custodia (and any other eligible depository institution) and unreviewable discretion
for the Kansas City Fed. At oral argument, counsel for the Kansas City Fed
suggested it disclaimed unreviewable discretion. But that is not the clear logic of its
position. Custodia seeks relief under the Mandamus Act, and mandamus is only
available to compel nondiscretionary acts. 28 U.S.C. § 1361. By granting the
Kansas City Fed any discretion, we preclude mandamus relief. When pressed at oral
argument to give us another way the Kansas City Fed’s discretion would be subject to
judicial review, counsel could not.
The district courts that have agreed with the Kansas City Fed’s position,
moreover, have found the regional banks’ discretion to be beyond judicial review.
Both the Southern District of New York and the District of Idaho recognized that if
master account decisions are discretionary, they are beyond APA review and
mandamus relief. In Banco San Juan Internacional, Inc. v Federal Reserve Bank of
New York, the court ruled that master accounts were governed by § 342 and were
subject to the bank’s discretion. 762 F. Supp. 3d at 266–67. As a result, it ruled that
Banco San Juan’s “APA, Mandamus Act, and DJA claims are precluded from review
by statute.” Id. at 274. It then dismissed Banco San Juan’s due process claims
because the bank failed to identify a valid cause of action. Id. at 283. Finally, the
court dismissed Banco San Juan’s state-law claims because the bank had conceded
that the New York Fed had a discretionary right to terminate master accounts. Id. at
284. The district court in PayServices Bank v. Federal Reserve Bank of San
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Francisco likewise recognized that “[t]he success of [PayServices’ APA, Mandamus,
and Due Process] claims depends on the existence of a nondiscretionary duty.” 2024
WL 1347094, at *6. At oral argument before the Ninth Circuit, counsel for the San
Francisco Fed confirmed his argument was that there was “no opportunity for judicial
review.” Oral Argument at 18:58, PayServices Bank v. Federal Rsrv. Bank of S.F.,
No. 24-2455 (9th Cir. argued Dec. 12, 2024).
The Kansas City Fed’s attempt to temper its legal claim misses the larger
consequence of its theory. There is really no way around the fact that any discretion
becomes unreviewable discretion.
Either outcome would come with significant consequences for our financial
system and our federal structure. The majority concludes that the better view is Fed
discretion. But the MCA is no mousehole—it upended the bargain between the
federal reserve and nonmember banks. As one scholar aptly explains, “Congress
struck a compromise in the Monetary Control Act of 1980: All depository institutions
would be subject to federally established reserve requirements and in return all
depository institutions would get access to the Federal Reserve’s payment services.”
Julie Andersen Hill, From Cannabis to Crypto: Federal Reserve Discretion in
Payments, 109 Iowa L. Rev. 117, 168 (2023). Even the Fed’s own publications
recognize that the MCA “changed the way the Fed provided services.” Federal
Reserve System: The First 100 Years, Fed. Rsrv. Bank of Phila. (Jan. 2021),
https://www.philadelphiafed.org/-
/media/FRBP/Assets/Institutional/Education/Publications/federal-reserve-system-the-
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first-100-years.pdf. Mandating that Custodia have access to Fed payment systems is
perfectly in line with the policy changes Congress intended in the MCA.
The MCA was passed in 1980 and, to my knowledge, the Fed denied a master
account for the first time in 2015. See Fourth Corner Credit Union, 861 F.3d at 1053
(Moritz, J., concurring). During those 30 years, the Fed used other tools to mitigate
potential risk to the financial system. It still has general discretion over deposits and
can reject deposits it views as risky. 5 Section 241(c)(2) also explicitly leaves open
all other requirements that member banks are subject to. 12 U.S.C. § 248a(c)(2)
(“[N]onmembers shall be subject to any other terms, including a requirement of
balances sufficient for clearing purposes, that the Board may determine are
applicable to member banks.”). The Fed can require banks to maintain extra
balances, limit the total deposits, limit the size of transfers, and deny access to other
services not covered under § 248a, like the discount window. See generally Guide to
the Federal Reserve’s Payment System Risk Policy on Intraday Credit, Bd. of
Governors of the Fed. Rsrv. Sys. (July 20, 2023),
https://www.federalreserve.gov/paymentsystems/files /psr_guide.pdf. The Fed has
managed risky banks with master accounts for years, and I am confident it still can.
Indeed, recent history has amply demonstrated that traditional banks can be no less
5
Of course, the Fed cannot deny all deposits and de facto prevent Custodia
from accessing payment services. Nat’l Rifle Ass’n of Am. v. Vullo, 602 U.S. 175,
191 (2024) (“[A] government official cannot do indirectly what she is barred from
doing directly.”).
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risky than innovative banks. The Fed’s policy concerns can be handled through
policy innovation rather than shutting the door to innovative banks and insulating
itself from judicial review.
D. Constitutional Avoidance
Finally, the majority’s interpretation of the law, though plausible, raises a host
of constitutional concerns that we are bound to avoid. See Clark v. Martinez, 543
U.S. 371, 380–81 (2005) (“[W]hen deciding which of two plausible statutory
constructions to adopt, a court must consider the necessary consequences of its
choice. If one of them would raise a multitude of constitutional problems, the other
should prevail.”). I agree with Custodia and its amici that giving unreviewable
discretion to the Kansas City Fed would push the boundaries of executive power. So
I adopt the interpretation that limits the Fed’s discretion and evades any
constitutional issues thereby.
The executive power in Article II of the Constitution is “vested in a President
of the United States of America.” U.S. Const. art. II, § 1, cl.1. The Constitution
“provides for executive officers to ‘assist the supreme Magistrate in discharging the
duties of his trust.’” Free Enter. Fund v. Pub. Co. Acct. Oversight Bd., 561 U.S. 477,
483 (2010) (quoting 30 Writings of George Washington 334 (J. Fitzpatrick ed.
1939)). These officers must still be accountable to the people, by being accountable
to the President. See generally, Michael W. McConnell, The President Who Would
Not Be King: Executive Power under the Constitution 161–69 (2020) (“Unless the
President has the power to remove executive officers ‘at pleasure’—to use
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Gouverneur Morris’s term—he cannot exercise control of the executive branch,
cannot ‘take care’ that the laws be faithfully executed, and is deprived of a portion of
‘the executive power.’”). They must meet the appointment and removal requirements
set forth by the Constitution and Supreme Court case law.
The Supreme Court’s clearest articulation of the distinction between superior
officers, inferior officers, and employees comes from Lucia. In Lucia, the Court
ruled that SEC Administrative Law Judges are officers of the United States, not mere
employees. Lucia v. Sec. & Exch. Comm’n, 585 U.S. 237, 249 (2018). The Lucia
majority held that the ALJs were officers under Buckley v. Valeo’s “significant
authority” test. Id. The Court did not reach the question of whether the ALJs were
inferior or superior officers because the ALJs were unconstitutionally appointed
regardless of that distinction. Id. at 245–46. In this case, the President of the Kansas
City Fed is certainly not a constitutionally appointed superior officer, and if he is an
inferior officer, the appointment and removal process are suspect. Like Lucia, we are
concerned with the line between officer and employee.
Principal officers who occupy a “continuing position established by law” and
“exercise significant authority pursuant to the laws of the United States,” Lucia, 585
U.S. at 245 (citation modified), must be appointed by the President and confirmed by
the Senate, see U.S. Const. art. II, § 2, cl. 2. Inferior officers also occupy a
continuing position and exercise significant authority but may be appointed by, and
must be subject to, a principal officer. See Edmond v. United States, 520 U.S. 651,
662–63 (1997). All other executive officials are employees whose “duties [are]
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‘occasional or temporary’ rather than ‘continuing and permanent.’” Lucia, 585 U.S.
at 245 (quoting United States v. Germaine, 99 U.S. 508, 511–12 (1878)). The
Constitution “cares not a whit about who” appoints employees. Id.
The majority’s decision that the Kansas City Fed and its president may deny
master accounts makes it much more likely that they are inferior officers of the
United States. “The exercise of ‘significant authority pursuant to the laws of the
United States’ marks . . . the line between officer and nonofficer.” Edmond, 520 U.S.
at 662 (quoting Buckley v. Valeo, 424 U.S. 1, 126 (1976)). If the Kansas City Fed
President is an inferior officer, then we must question whether the appointment and
removal process is constitutional. Recall that the bank president is chosen from
among the C-Class directors appointed by the Board of Governors by the A- and B-
Class directors chosen by the private member banks. The Governors may be
principal officers, but whether they are properly appointing regional bank presidents
is a tricky legal question. The bank president can also be removed by either the
board of directors or the Board of Governors. Since “executive power include[s] a
power to oversee executive officers through removal,” Free Enter. Fund, 561 U.S. at
492, I am skeptical of an attempt to delegate the removal power to private board
members.
I do not mean to suggest that the entirety of the Federal Reserve System is
unconstitutional. The Supreme Court has made clear “[t]he Federal Reserve is a
uniquely structured, quasi-private entity that follows in the distinct historical
tradition of the First and Second Banks of the United States.” Trump v. Wilcox, 145
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S. Ct. 1415, 1415 (2025). But if the Fed’s independence is constitutional only
because it “follows in the distinct historical tradition of the First and Second Banks
of the United States,” id., the Fed would be wise not to expand its power beyond its
historical limits. As scholars have put it, “[m]oving money around . . . seems quite
like what the First and Second Banks did,” but “to the extent that Congress has given
the Fed regulatory authority for this purpose . . . , the argument that the President
does not enjoy removal authority is much harder to make.” Aditya Bamzai & Aaron
L. Nielson, Article II and the Federal Reserve, 109 Cornell L. Rev. 843, 906–07
(2024).
We can avoid these thorny questions if we conclude, as I think we must, that
the Bank President is merely an employee of the United States. So we must favor the
interpretation of the statute that prohibits the Kansas City Fed President from
exercising “significant executive authority.” Lucia, 585 U.S. at 245.
We are bound by the ordinary language of the statute and, in my view, shall
means shall. Section § 248a(c)(2) mandates access to the Fed’s payment services for
all nonmember depository institutions. By denying Custodia a master account, the
Kansas City Fed has unlawfully denied it access to those services which are vital to
its business. That, it cannot do.
III. Conclusion
This case comes clothed in 21st Century terms: cryptocurrency, digital assets,
instant wire transfers, and master accounts. But there is nothing new about this issue.
Courts have probed the legality of our nation’s central bank and interpreted the
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relevant statutes since the founding. It remains true that “where a specific duty is
assigned by law, and individual rights depend upon the performance of that duty, it
seems equally clear that the individual who considers himself injured, has a right to
resort to the laws of his country for a remedy.” Marbury v. Madison, 5 U.S. 137, 166
(1803). The Monetary Control Act unambiguously provides that the Federal
Reserve’s payment services “shall be available” to nonmember institutions like
Custodia. 12 U.S.C. § 248a(c)(2). Under the Mandamus Act, the district court has
the power to order a federal actor to perform a nondiscretionary duty.
29