A sitting U.S. senator, a former one, and two digital-asset organizations petitioned the Supreme Court this week to resolve a long-running dispute over Wyoming lender Custodia’s lack of access to a Federal Reserve master account.

In a court brief filed Thursday, Sen. Cynthia Lummis, R- WY, and former Sen. Pat Toomey, R-PA, faulted the 10th Circuit Court of Appeals, saying judges inferred that Federal Reserve outposts like the Kansas City Fed have the power to deny a master account application simply because the 2022 Toomey Amendment requires the Fed to publish a database listing every master-account request and whether it was approved, rejected, pending or withdrawn.

The amendment “confers no statutory authority and prescribes no criteria for master-account approval or rejection,” Lummis and Toomey wrote.

“Congress writes reporting mandates constantly, and it writes them precisely when it distrusts what an agency is doing,” the lawmakers wrote.

Lummis and Toomey said the resulting database revealed a “two-track system.”

“Among applicants that are federally insured — Tier 1 under the [Fed]’s own guidelines — the Fed approved 92 of 111 requests, ninety-four percent of the 98 it has resolved, at a median of fifty-four days. It rejected one,” the lawmakers said. “Among applicants that are not federally insured, it approved three of fifty-six, nine percent of those resolved, at a median of 648 days.”

Custodia sued the Fed in June 2022, citing a time gap: It had been waiting 19 months for its master account application to be processed – even though central bank materials indicated the process typically takes “5-7 business days.”

The Wyoming lender’s rancor was further inflamed when the Fed approved BNY – in short order – to take custody of clients’ crypto assets. The Fed disputed Custodia’s allegations that the central bank showed favor toward BNY.

The Fed and its Kansas City outpost then denied Custodia’s application in January 2023, arguing the crypto firm’s business model relied too heavily on volatile crypto markets and lacked sufficient controls to manage risk of intrusion by illicit finance. The Fed also cited Custodia’s limited experience in traditional risk management and the potential systemic implications of granting direct access to a crypto-centered institution.

Lummis and Toomey on Thursday said the Fed, in December 2025, “rescinded in its entirety the 2023 policy statement that had declared crypto-asset activity presumptively inconsistent with safe and sound banking — the supervisory position it announced on the same day it and the Kansas City Fed denied petitioner’s applications.”

The lawmakers also noted that in May the Fed proposed “a new type of payment account — with fewer services than a full master account” but “encouraged the Reserve Banks to pause decisions on access requests from Tier 3 institutions — petitioner’s category — pending an open-ended policy process” that contains time limits for federally insured master account applicants but “no timeline at all for uninsured institutions seeking a master account.”

Lummis and Toomey’s brief follows a petition Custodia itself filed with the Supreme Court last month after the 10th Circuit Court of Appeals upheld the barrier to master account access in a split decision. Judge Timothy Tymkovich of the 10th Circuit wrote a dissenting opinion, arguing that the law governing master account access requires that the Fed’s payment services “shall be available to nonmember depository institutions.”

The law “issues a command beyond the Fed’s discretion,” Tymkovich wrote.

The Blockchain Association, a trade group, echoed that quote in its own petition Wednesday.

The 10th Circuit’s decision “ratifies the Fed’s misuse of its payment services to further an impermissible policy goal — debanking the digital-asset industry,” the trade group said.

The decision upsets the balance of federal and state power in the banking sector, the association wrote.

“States have traditionally chartered banks in parallel with the federal government. But the decision … effectively gives the Fed veto power over chartering judgments by state regulators,” the group wrote. “That subversion of the Nation’s traditional dual banking system will stifle innovation and provides a blueprint for federal regulators to debank disfavored industries or companies in the future without interference from state regulators.”

A Fed master account would enable Custodia to settle transactions, hold reserves and send payments directly through the Fed’s system without an intermediary bank.

Denial of that privilege “forces a financial institution to rely on private intermediaries whose services can be withdrawn at will,” the Digital Chamber, another trade group, wrote in a separate brief Thursday.

Digital-asset firms “have been persistently underbanked, and because critical banking functions are concentrated among a small number of willing providers, the sector remains vulnerable to operational disruption,” the group wrote. “When willing banks have exited or withdrawn services, consequences have rippled across the sector, impairing liquidity, disrupting settlement, and harming consumers. The precarious banking environment has driven businesses offshore, reducing the United States’ role in global digital assets-related innovation.”

The Fed has until Sept. 11 to file its brief with the Supreme Court in the Custodia case.