Ideally, they should be able disallow whatever they want, and give up that business if they don't want it.
What they can't do is create a monopoly situation and continue to be that selective---because there is no other game in town, due to their own actions.
They already have a monopoly situation, so either they must be forced to allow all transactions or they must be forced to allow those that will to use their networks.
Tell ya what. When the postal service runs a card network to compete with them, that charges lower interest, and doesn't monetize by selling transaction sets, then we can talk about CC companies being able to be picky about transactions. Til then? Nah...
What they can't do is create a monopoly situation and continue to be that selective---because there is no other game in town, due to their own actions.