A U.S. federal judge has granted preliminary approval to a revised $38 billion settlement between merchants and payment giants Visa and Mastercard, marking a major milestone in one of the longest-running and most consequential antitrust disputes in American financial history.

The decision by U.S. District Judge Brian Cogan moves the agreement closer to final approval and could reshape how merchants accept card payments, potentially loosening some of the restrictions that have governed the U.S. card industry for decades.

The case dates back to 2005, when merchants accused Visa, Mastercard, and major issuing banks of conspiring to inflate interchange fees, commonly known as swipe fees, which retailers pay every time consumers use credit cards.

While the settlement does not fundamentally dismantle the existing card-payment ecosystem, it represents one of the most significant concessions ever extracted from the dominant payment networks.

The dispute centers on interchange fees, which merchants have long argued are among the highest in the world and reflect Visa and Mastercard’s overwhelming market power. The revised agreement emerged after an earlier $30 billion settlement was rejected in 2024 by Judge Margo Brodie, who concluded that the proposed remedies did not go far enough in addressing the competitive concerns raised by merchants.

The new settlement seeks to address those shortcomings by offering larger fee reductions and greater flexibility for merchants.

Under the agreement:

• Visa and Mastercard will reduce interchange fees by 0.1 percentage point for five years.
• Standard consumer card rates will be capped at 1.25% for eight years.
• Merchants will gain broader authority to impose surcharges on customers.
• Retailers will be allowed to decide whether to accept commercial cards, premium rewards cards, or standard consumer cards separately.

The final provision is especially significant because it weakens the longstanding “Honor All Cards” framework that historically required merchants to accept all cards within a network or reject them entirely.

A Challenge To The Economics Of Rewards Cards

The settlement could have important implications for the lucrative rewards-card business that has become central to the U.S. consumer credit market. Premium rewards cards generate some of the highest interchange fees in the industry because banks use those revenues to fund travel points, cashback offers, and other consumer incentives.

For years, merchants argued they were effectively subsidizing those rewards programs through higher processing fees. The revised settlement gives retailers more leverage by allowing them to reject certain categories of cards while continuing to accept others.

Although many merchants may be reluctant to stop accepting premium cards because of customer expectations, the mere possibility creates new negotiating leverage that did not previously exist. The result could place pressure on banks to reassess rewards economics over time if merchant acceptance becomes more selective.

Why merchants remain dissatisfied

Despite the court victory for Visa and Mastercard, opposition from major retailers remains strong. Groups including the National Retail Federation, the Merchants Payments Coalition, and the National Association of Convenience Stores argued that the settlement still leaves fundamental competitive issues unresolved.

Their concern is that consumers increasingly rely on premium rewards cards, making it difficult for retailers to reject those cards without risking lost sales. In practice, merchants argue that they will remain compelled to accept high-cost cards because customers expect them to do so.

Retail giant Walmart was among the settlement’s most vocal critics, arguing that the agreement allows Visa and Mastercard to preserve market practices that have persisted for decades.

Another unresolved issue involves issuer-level acceptance. Merchants will still be unable to selectively reject cards issued by specific banks while accepting cards from others within the same network.

That limitation preserves much of the bargaining power enjoyed by large card issuers.

The enormous scale of the swipe-fee economy

According to data cited by merchant groups, Visa and Mastercard swipe fees reached approximately $118.8 billion in 2025, up from $111.2 billion in 2024 and nearly five times the $25.6 billion recorded in 2009. The average interchange fee climbed to roughly 2.36%, making payment processing one of the largest operating expenses for many retailers after labor and rent.

The growth of rewards cards, digital payments, and e-commerce has accelerated fee generation across the industry.

As cash usage continues to decline, merchants have become increasingly dependent on card networks, strengthening concerns about competition and pricing power. Supporters of the settlement argue that the agreement could generate benefits beyond merchants themselves.

The plaintiffs’ economic experts, including Nobel Prize-winning economist Joseph Stiglitz and University of Washington professor Keith Leffler, estimate that the agreement could save merchants roughly $38 billion through 2031 and generate broader economic benefits worth as much as $224 billion.

Their argument is that lower payment-processing costs could eventually translate into lower prices for consumers. Whether those savings are passed through remains uncertain. Historically, economists have debated how much merchant cost reductions ultimately benefit shoppers versus boosting retailer margins.

However, the settlement highlights the extraordinary influence Visa and Mastercard continue to exert over global commerce. Together, the two networks process the vast majority of U.S. credit-card transactions and serve as critical infrastructure for the modern economy.

Although the agreement introduces greater flexibility for merchants, it stops short of fundamentally restructuring the card-payment market. That reality helps explain why Visa and Mastercard shares rose after the ruling. Investors appear to view the settlement as manageable and unlikely to materially disrupt the industry’s long-term profitability.

The broader antitrust debate, however, is unlikely to disappear. As digital payments continue to replace cash and as regulators globally scrutinize payment fees, network power, and market concentration, pressure on the card industry’s business model is likely to persist.

U.S. stock futures moved lower Wednesday night after fresh American military strikes against Iran heightened geopolitical tensions and reignited concerns about energy prices, inflation, and the durability of the market’s AI-driven rally.

Futures linked to the S&P 500, Nasdaq 100, and Dow Jones Industrial Average all declined after U.S. Central Command announced additional “self-defense strikes” against Iranian targets, carried out under the direction of President Donald Trump. The development pushed oil prices sharply higher, with West Texas Intermediate crude rising about 2% to trade near $92 a barrel.

The market reaction highlights a growing shift in investor sentiment. For much of the past two years, artificial intelligence optimism powered a historic surge in technology shares, helping companies such as Nvidia, Microsoft, and other AI beneficiaries drive major indexes to record highs. But as geopolitical risks intensify and energy costs climb, investors are reassessing whether the next phase of the market will be led by different sectors.

AI trade faces its biggest test

Wednesday’s selloff was notable because it was driven not only by geopolitical concerns but also by renewed weakness in semiconductor stocks, the sector that has become the centerpiece of the AI boom.

The Dow Jones Industrial Average fell more than 950 points, while the S&P 500 and Nasdaq suffered broad declines approaching 2%.

The retreat comes at a sensitive moment for technology markets. Investors are already digesting an unprecedented capital spending cycle involving AI infrastructure, data centers, chips, and power generation.

Over recent weeks, markets have been flooded with announcements involving massive fundraising plans and public offerings from AI-related companies, including SpaceX, OpenAI, and Anthropic. At the same time, major technology firms continue to commit hundreds of billions of dollars toward AI infrastructure.

Some investors are beginning to question whether the extraordinary spending can continue indefinitely without creating excess capacity or compressing future returns.

Energy emerges as a major beneficiary

The rise in oil prices has strengthened the appeal of energy stocks, which have lagged technology for much of the AI boom. The Middle East remains central to global energy markets, and any threat to production or transportation routes can have significant consequences for crude prices.

Markets remain particularly sensitive to developments affecting the Strait of Hormuz, through which roughly one-fifth of global oil supplies move. Higher oil prices are also boosting expectations that energy companies could deliver stronger earnings after several quarters of relative underperformance.

This helps explain why portfolio managers are increasingly shifting funds toward energy producers, refiners, and related industries.

According to market strategists, investors are searching for assets that offer exposure to economic growth without relying on AI-related valuations.

Healthcare has emerged as one beneficiary of that trend. Pharmaceutical and biotechnology stocks are attracting renewed interest as investors seek defensive growth opportunities that may be less sensitive to technology spending cycles.

Financial stocks are also drawing attention. Higher interest rates, resilient economic activity, and strong credit conditions continue to support profitability across much of the banking sector.

The rotation does not necessarily signal the end of the AI trade. Instead, it suggests investors are becoming more selective after a period in which almost any company associated with artificial intelligence attracted capital.

Inflation risks return to the spotlight

The surge in oil prices is arriving just as investors prepare for another key inflation reading. Markets will closely watch the release of the May producer price index data, which provides insight into inflation pressures facing businesses.

Although economists expect wholesale inflation to moderate compared with April, energy prices remain a critical variable. A sustained rise in oil could quickly filter through transportation, manufacturing, and consumer goods costs, complicating efforts by the Federal Reserve to eventually ease monetary policy.

This concern has become important after several major financial institutions, including Goldman Sachs, recently pushed back expectations for U.S. interest-rate cuts, citing stronger economic growth and persistent inflation pressures.

Markets now face two interconnected questions.

The first is geopolitical: whether tensions between Washington and Tehran continue escalating or whether diplomatic efforts can stabilize the situation.

The second is financial: whether investors remain willing to fund the enormous wave of AI-related spending, infrastructure projects, and IPOs that are approaching the market.

For now, the answer appears mixed. AI remains the dominant long-term investment theme, but the latest market moves suggest investors are becoming more cautious about concentration risk and are beginning to diversify into sectors that could benefit from a different economic environment.

If oil prices remain elevated and geopolitical uncertainty persists, energy, healthcare, and financials could continue attracting capital at the expense of technology stocks. But if tensions ease and inflation remains contained, the AI trade may quickly regain momentum.