A PYMNTS Company

Judge Upholds Fed’s Debit Swipe Fee Cap in Kentucky Case

By  |  September 16, 2025

A federal judge in Kentucky has sided with the Federal Reserve in a closely watched case over debit card transaction fees, marking a significant development in a dispute that has divided courts across the country.

    Get the Full Story

    Complete the form to unlock this article and enjoy unlimited free access to all PYMNTS content — no additional logins required.

    yesSubscribe to our daily newsletter, PYMNTS Today.

    By completing this form, you agree to receive marketing communications from PYMNTS and to the sharing of your information with our sponsor, if applicable, in accordance with our Privacy Policy and Terms and Conditions.

    According to Reuters, U.S. District Judge Gregory Van Tatenhove ruled on Monday that the Fed acted within its authority when it established a cap of 21 cents per transaction for debit card “swipe fees.” The decision came in the case brought by Linney’s Pizza, a restaurant based in Frankfort, Kentucky, which sued in 2022, arguing the rule was unjustified.

    The ruling contrasts with an earlier decision from a federal judge in North Dakota, who in August struck down the Fed’s regulation. That ruling, however, was placed on hold while the case proceeds on appeal. Per Reuters, the conflicting judgments set the stage for the issue to be resolved by higher courts, with Linney’s able to challenge the Kentucky decision at the 6th U.S. Circuit Court of Appeals in Cincinnati.

    The debate over swipe fees has been a long-running battle between banks and retailers. Merchants contend that the fees increase costs for businesses and ultimately consumers, while banks argue that the current cap underestimates the expenses card issuers face to maintain secure and reliable payment networks. The regulation requires banks to set debit fees at a level that is “reasonable and proportional.”

    Read more: Judge Clears Path for DOJ Antitrust Suit Against Visa

    Judge Van Tatenhove emphasized that Linney’s “fails to recognize” the Federal Reserve’s obligation to weigh competing considerations when setting the fee structure, Reuters reported. The decision represents a setback for the restaurant but bolsters the Fed’s position as it faces challenges in multiple courts.

    The Federal Reserve declined to comment on the ruling, and attorneys for Linney’s did not immediately respond to requests for comment. Meanwhile, the Fed has not yet appealed the North Dakota decision, which would be heard by the 8th U.S. Circuit Court of Appeals in St. Louis.

    The legal battles come as the Fed is considering further changes to swipe fees. A proposal introduced in 2023 would reduce the cap from 21 cents to 14.4 cents per transaction, though the measure remains pending. Debit card transaction fees were unregulated until 2011, when the Fed first imposed the 21-cent cap.

    The case is titled Linney’s Pizza v. Board of Governors of the Federal Reserve System, U.S. District Court for the Eastern District of Kentucky, No. 3:22-cv-00071.

    Source: Reuters