Colorado vetoes card-fee cap, Illinois injunction clouds restaurant relief

Restaurant operators got a fresh reminder that interchange-fee relief can disappear fast, even after months of lobbying and legislative work. In Colorado, Gov. Jared Polis vetoed SB 26-134 on June 3, 2026, killing a bill that would have barred payment card networks and large financial institutions from charging interchange fees on the sales-tax portion of card transactions.

The Colorado bill would have applied to payment card networks and institutions with more than $60 billion in assets. Polis said the measure carried too much legal risk and pointed to the Illinois court fight in his veto message, a sign that even states inclined to act are now reading the federal courts as a warning flare. For restaurant owners trying to hold the line on menu prices and labor costs, that means the fees tied to every card swipe stay where they are for now.

Illinois is no cleaner a path. The state passed the Interchange Fee Prohibition Act in 2024 and pushed its effective date from July 1, 2025, to July 1, 2026. A federal court in the Northern District of Illinois upheld the tax- and gratuity-related fee restriction on February 10, 2026, but on June 1, 2026, the same court issued a permanent injunction blocking enforcement of the interchange-fee ban and data-use limits against national banks, out-of-state state-chartered banks protected by federal law, federal savings associations, and payment card networks. The Illinois attorney general has cross-appealed the data-use restrictions.

For restaurants, this is not abstract finance law. Swipe fees are often the third-highest operating expense after food and labor, according to National Restaurant Association materials, and industry estimates put card processing at about 2% to 3% of a credit card sale. One industry source put total merchant interchange and processing fees at about $187.2 billion in 2024. When those costs stick, they come out of the same margin that funds wages, scheduling, and training.

That is why stalled fee reform hits the floor so hard. If more revenue keeps going to card processing, managers have less room to absorb food inflation, add hours, hire faster, or raise pay without cutting somewhere else. The pressure can show up as tighter schedules, slower hiring, fewer training hours, more aggressive table turns, or menu price increases that can soften traffic and tips. Illinois had been seen as the first state to target interchange fees on the tax and gratuity portions of transactions, but Colorado’s veto and Illinois’ injunction show how quickly restaurant leverage can vanish once the fight reaches the courts.