Knife Merchant Accounts: What the Switchblade Ruling Doesn't Change

On October 21, 2026, the federal appeals court for Texas, Louisiana and Mississippi held that the core of the Federal Switchblade Act violates the Second Amendment. Knife retailers noticed. If shipping automatic knives across state lines is no longer a federal crime, the reasoning goes, the payment processors that turned knife shops away should have less to worry about.

It is not that simple. The ruling is not final, it does not bind courts in the rest of the country, it leaves every state knife law in place, and it does not touch the terms that payment platforms write for themselves. This guide explains what the court decided, which rules an underwriter will still apply to a knife seller, and how to put together an application that a high-risk acquirer can approve. Card network rules are cited from the Visa Core Rules and Visa Product and Service Rules of 24 October 2026 and the Visa Merchant Data Standards Manual of October 2026.

What the Fifth Circuit decided

The case is Knife Rights, Inc. v. Blanche, No. 25-10754, brought by an advocacy group, two Texas businesses and several individuals. The Federal Switchblade Act of 1958 has two main prohibitions. Section 1242 of title 15 makes it a crime to knowingly introduce, manufacture for introduction, transport or distribute a switchblade knife in interstate commerce, punishable by a fine of up to $2,000, up to five years in prison, or both. Section 1243 bans making, selling or possessing switchblades in U.S. territories and possessions, in Indian country and within federal maritime and territorial jurisdiction.

A unanimous panel held that switchblades are arms covered by the Second Amendment and that the government had not shown section 1242 fits the nation's historical tradition of weapons regulation. It reversed the dismissal of the challenge to section 1242. It upheld the dismissal of the challenge to section 1243, finding the plaintiffs had not met the standard for a facial challenge, and it sent the case back to the district court for further proceedings.

Why nothing changes yet

Three things limit what the decision does today:

• It is not final. When the United States or a federal officer is a party to a civil case, the Federal Rules of Appellate Procedure give any party 45 days after judgment to petition for rehearing, and the court's mandate does not issue until 7 days after that window closes. The district court still has to act on remand.
• It binds only federal courts within the Fifth Circuit. Courts elsewhere are not bound by it, and section 1242 remains in the U.S. Code.
• It leaves other federal knife provisions alone. The case did not challenge the separate ban on ballistic knives, those with a detachable blade propelled by a spring, in section 1245. The opinion also does not mention the Customs regulations that treat imported switchblades as importations contrary to law, discussed below.

The Ninth Circuit has gone the other way on a state law. In Knife Rights, Inc. v. Bonta, decided January 30, 2026, it rejected a facial challenge to California's switchblade regulations, holding narrowly that California may ban carrying switchblades concealed and declining to decide whether the state's other restrictions, including its sales ban, are constitutional. Rehearing en banc was later denied. The two courts were reviewing different laws, but together they show that knife regulation is unsettled, and an underwriter will not approve a business model that depends on a ruling that may still change.

What federal law says about knives

For underwriting, the federal definition matters more than the court case, because it decides which products in a catalog are switchblades at all.

Under 15 U.S.C. 1241, a switchblade is a knife whose blade opens automatically by hand pressure on a button or other device in the handle, or by inertia, gravity or both. Section 1244 lists exceptions. The one that matters most to retailers was added in 2009: the Act does not apply to a knife with a spring, detent or other mechanism that biases the blade toward closure and requires exertion on the blade by hand, wrist or arm to overcome that bias. That describes the common assisted-opening folder, where the user starts opening the blade and a spring finishes the job. An assisted opener falls outside the federal Act. A true automatic, opened by a button in the handle, does not.

Imports have their own rules. U.S. Customs and Border Protection's regulations at 19 CFR 12.95 define an imported switchblade by the same characteristics, and expressly list balisong or butterfly, gravity and ballistic knives among the kinds of knives the definition can cover when they have those characteristics. The definition also reaches knives that can be converted to open automatically with insignificant preparation, and unassembled kits that would. Under 19 CFR 12.97, importing a switchblade outside the statute's exceptions is an importation contrary to law and the goods are subject to forfeiture. Under 19 CFR 12.96, common pocketknives and fixed-blade weapons such as swords, sheath knives and machetes may be imported, though the regulation warns that possessing them may still break state or local law.

A retailer that imports stock, or that drop-ships from overseas suppliers, should expect an acquirer to ask where the inventory comes from and how it cleared customs.

State law still decides where you can sell

Knife law is mostly state law, and states differ widely on automatic knives, gravity knives, balisongs, dirks and daggers, and blade length. California shows how specific those rules get. Penal Code section 21510 makes it a misdemeanor to sell, offer for sale, expose for sale, loan, transfer or give another person a switchblade with a blade two or more inches long. Section 17235 defines a switchblade broadly. It includes spring-blade, snap-blade and gravity knives released by a button, pressure on the handle, a flip of the wrist or any other mechanism, but excludes a one-hand opener worked by thumb pressure on the blade or a thumb stud, as long as the knife has a detent or bias that resists opening. Those are the rules the Ninth Circuit left standing.

The card networks care because of one line in Visa's rules: a transaction must be legal in both the cardholder's jurisdiction and the merchant outlet's jurisdiction (ID# 0000385). A Texas store that ships an automatic knife to a California address has put a sale through Visa that may be illegal where the buyer is, whatever happens to the federal statute. City and county ordinances add another layer in some places.

What an acquirer wants to see is a checkout that blocks restricted products by destination. That means a product-by-state restriction table that someone keeps up to date and that the shopping cart actually enforces, not a disclaimer asking buyers to know their own laws.

How processors and card networks classify knife sellers

Visa's Merchant Data Standards Manual has no knife-specific merchant category code. It lists sporting knives under MCC 5941, Sporting Goods Stores, alongside camping and hunting equipment, and kitchen cutlery under MCC 5719, Miscellaneous Home Furnishing Specialty Stores. A shop selling chef's knives and a shop selling tactical folders and automatics can therefore carry different codes, and the code should match what you actually sell.

General-purpose platforms set their own limits, and the Fifth Circuit's ruling does not change any of them:

• Stripe's prohibited and restricted businesses list, last updated September 22, 2026, prohibits illegal weapons and accessories. It treats legal weapons as restricted, with limited availability, naming examples such as stun guns, swords not meant as replicas, pepper spray and machetes, and requires contacting its sales team first.
• PayPal's Acceptable Use Policy, last updated October 29, 2022, prohibits using PayPal for transactions involving certain weapons or knives regulated under applicable law.
• Square's General Terms dated October 27, 2026, which apply to all Square sellers from November 12, 2026, prohibit using its services to sell weapons or other devices designed to cause physical harm.

The wording leaves room for interpretation, and how a platform applies it is up to that platform. A shop selling only kitchen knives may sit comfortably on one. A shop whose catalog includes automatics, balisongs or knives marketed for self-defense is the kind of account a platform may review, and possibly close, after it has started processing. That is the point at which a dedicated merchant account with an acquirer that has approved the category in advance is worth the extra paperwork.

What an underwriter will ask a knife retailer

Expect an acquirer to want evidence that you know what you sell, where it can legally go and how it reaches the buyer:

• A catalog sorted by mechanism: fixed blade, manual folder, assisted opener, automatic, gravity, balisong. Product pages should describe the opening mechanism accurately, because that is how a reviewer, and a court, will classify the knife.
• Your state restriction table and an explanation of how checkout enforces it, including how you handle a billing address in one state and a shipping address in another.
• Sourcing and import records for any stock made abroad.
• Any age-verification or adult-signature steps you use for online orders.
• Your refund, return and shipping policies as customers see them at checkout.
• Monthly volume, average order value and the share of sales that are online.

Merchants that sell firearms alongside knives should also read our guide to MCC 5723, the firearms merchant category code, since the two product lines may need to be handled separately.

Keeping disputes winnable

Online knife sales draw the same disputes as any card-not-present retailer. Fraud claims come under Visa Dispute Condition 10.4, Other Fraud – Card-Absent Environment, and missing deliveries under Dispute Condition 13.1, Merchandise/Services Not Received. Our guide to Visa chargeback reason codes covers each condition. For each order, keep:

• The order record, the policies the customer accepted and the product page as it appeared at the time of sale
• The shipping address and the record that it passed your destination restriction check
• Carrier tracking and delivery confirmation, with an adult signature where you require one
• The AVS and card security code results, and device or IP data for online orders
• Any customer contact about the order and your response

The Fifth Circuit's ruling may eventually change what knife sellers can lawfully ship. For now, a knife retailer that classifies its catalog accurately, enforces state restrictions at checkout and can document where its stock comes from is a reasonable file for a high-risk acquirer. If that describes your business, talk to a PayKings specialist about an account built for it.