diff --git a/config/config.go b/config/config.go
index fbe2f5d..486275d 100644
--- a/config/config.go
+++ b/config/config.go
@@ -578,6 +578,13 @@ func validate(cfg *Config) error {
 	// status updates for any txid in the system if it runs without bearer-token
 	// auth, so we fail-closed here at config load rather than silently exposing
 	// the unauthenticated receiver. See issue #76 / finding F-018.
+	//
+	// This same check now also gates the OUTBOUND /watch token forwarding:
+	// merkleservice.Client.Register/RegisterBatch propagate cfg.CallbackToken
+	// to merkle-service so it can attach `Authorization: Bearer <token>` on
+	// callbacks. Without a configured token there's nothing to forward AND the
+	// inbound receiver would 401 anyway — the same fail-closed posture covers
+	// both ends, so a duplicate "outbound token required" check is unnecessary.
 	if cfg.MerkleService.URL != "" && cfg.CallbackToken == "" {
 		return fmt.Errorf("callback_token is required when merkle_service.url is set " +
 			"(unauthenticated /api/v1/merkle-service/callback would accept forged callbacks; see issue #76)")
diff --git a/merkleservice/client.go b/merkleservice/client.go
index 769e0bb..378661c 100644
--- a/merkleservice/client.go
+++ b/merkleservice/client.go
@@ -44,18 +44,29 @@ func (c *Client) SetLogger(logger *zap.Logger) {
 	c.logger = logger
 }
 
-// watchRequest is the payload sent to POST /watch
+// watchRequest is the payload sent to POST /watch.
+// CallbackToken (when non-empty) tells merkle-service which bearer token to
+// attach as `Authorization: Bearer <token>` on outbound callback delivery to
+// arcade. arcade's /api/v1/merkle-service/callback receiver requires this
+// header (PR #112 / F-018), so a missing token means callbacks 401. Empty
+// values are omitted from the JSON to preserve back-compat with merkle-service
+// builds that don't yet know the field.
 type watchRequest struct {
-	TxID        string `json:"txid"`
-	CallbackURL string `json:"callbackUrl"`
+	TxID          string `json:"txid"`
+	CallbackURL   string `json:"callbackUrl"`
+	CallbackToken string `json:"callbackToken,omitempty"`
 }
 
 // Register registers a transaction with the Merkle Service for watching.
 // The Merkle Service will send callbacks to callbackURL when the transaction is seen or mined.
-func (c *Client) Register(ctx context.Context, txid, callbackURL string) error {
+// callbackToken is forwarded so merkle-service can authenticate itself back to
+// arcade on callback delivery; empty string disables forwarding (and the JSON
+// field is omitted entirely thanks to omitempty).
+func (c *Client) Register(ctx context.Context, txid, callbackURL, callbackToken string) error {
 	body, err := json.Marshal(watchRequest{
-		TxID:        txid,
-		CallbackURL: callbackURL,
+		TxID:          txid,
+		CallbackURL:   callbackURL,
+		CallbackToken: callbackToken,
 	})
 	if err != nil {
 		return fmt.Errorf("failed to marshal watch request: %w", err)
@@ -98,9 +109,12 @@ func (c *Client) Register(ctx context.Context, txid, callbackURL string) error {
 }
 
 // Registration represents a single txid+callbackURL pair for batch registration.
+// CallbackToken is the bearer token merkle-service should use when calling
+// back to arcade for this registration; empty omits the field on the wire.
 type Registration struct {
-	TxID        string
-	CallbackURL string
+	TxID          string
+	CallbackURL   string
+	CallbackToken string
 }
 
 // RegisterBatch registers multiple transactions concurrently with bounded parallelism.
@@ -118,7 +132,7 @@ func (c *Client) RegisterBatch(ctx context.Context, registrations []Registration
 
 	for _, reg := range registrations {
 		g.Go(func() error {
-			return c.Register(gctx, reg.TxID, reg.CallbackURL)
+			return c.Register(gctx, reg.TxID, reg.CallbackURL, reg.CallbackToken)
 		})
 	}
 
diff --git a/merkleservice/client_test.go b/merkleservice/client_test.go
index 59f1683..c1ed80c 100644
--- a/merkleservice/client_test.go
+++ b/merkleservice/client_test.go
@@ -26,7 +26,7 @@ func TestRegister(t *testing.T) {
 	defer server.Close()
 
 	client := NewClient(server.URL, "mytoken", 0)
-	err := client.Register(context.Background(), "abc123", "http://callback/url")
+	err := client.Register(context.Background(), "abc123", "http://callback/url", "")
 	if err != nil {
 		t.Fatalf("unexpected error: %v", err)
 	}
@@ -44,6 +44,62 @@ func TestRegister(t *testing.T) {
 	}
 }
 
+// TestRegister_ForwardsCallbackToken pins the F-018 fix on the outbound
+// /watch path: when arcade is configured with a callback token, that token
+// must round-trip through the watch payload so merkle-service can stamp
+// Authorization on callbacks. The inbound receiver requires it; without
+// forwarding the loop 401s.
+func TestRegister_ForwardsCallbackToken(t *testing.T) {
+	var rawBody []byte
+	server := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+		rawBody, _ = io.ReadAll(r.Body)
+		w.WriteHeader(http.StatusOK)
+	}))
+	defer server.Close()
+
+	client := NewClient(server.URL, "auth-token", 0)
+	if err := client.Register(context.Background(), "abc123", "http://callback/url", "my-token"); err != nil {
+		t.Fatalf("unexpected error: %v", err)
+	}
+
+	// Field present and exact match on the wire.
+	if !strings.Contains(string(rawBody), `"callbackToken":"my-token"`) {
+		t.Errorf("expected body to contain callbackToken=my-token, got %s", string(rawBody))
+	}
+
+	// And it round-trips cleanly through json.Unmarshal too.
+	var parsed map[string]string
+	if err := json.Unmarshal(rawBody, &parsed); err != nil {
+		t.Fatalf("body is not valid JSON: %v", err)
+	}
+	if parsed["callbackToken"] != "my-token" {
+		t.Errorf("expected callbackToken=my-token, got %q", parsed["callbackToken"])
+	}
+}
+
+// TestRegister_OmitsEmptyCallbackToken pins the back-compat half: pre-fix
+// callers (and arcade builds without a configured token) must produce a wire
+// payload with NO callbackToken key, so merkle-service builds that don't yet
+// know the field aren't impacted. The omitempty tag is what enforces this and
+// the test exists specifically to fail loudly if someone removes it.
+func TestRegister_OmitsEmptyCallbackToken(t *testing.T) {
+	var rawBody []byte
+	server := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+		rawBody, _ = io.ReadAll(r.Body)
+		w.WriteHeader(http.StatusOK)
+	}))
+	defer server.Close()
+
+	client := NewClient(server.URL, "", 0)
+	if err := client.Register(context.Background(), "abc123", "http://callback/url", ""); err != nil {
+		t.Fatalf("unexpected error: %v", err)
+	}
+
+	if strings.Contains(string(rawBody), "callbackToken") {
+		t.Errorf("expected body to omit callbackToken when empty, got %s", string(rawBody))
+	}
+}
+
 func TestRegister_Error(t *testing.T) {
 	server := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, _ *http.Request) {
 		w.WriteHeader(http.StatusInternalServerError)
@@ -51,7 +107,7 @@ func TestRegister_Error(t *testing.T) {
 	defer server.Close()
 
 	client := NewClient(server.URL, "", 0)
-	err := client.Register(context.Background(), "abc123", "http://callback")
+	err := client.Register(context.Background(), "abc123", "http://callback", "")
 	if err == nil {
 		t.Error("expected error for 500 response")
 	}
diff --git a/services/propagation/propagator.go b/services/propagation/propagator.go
index 675452b..8172071 100644
--- a/services/propagation/propagator.go
+++ b/services/propagation/propagator.go
@@ -214,7 +214,7 @@ func (p *Propagator) handleMessage(ctx context.Context, msg *kafka.Message) erro
 
 	if p.merkleClient != nil && p.cfg.CallbackURL != "" {
 		mStart := time.Now()
-		if err := p.merkleClient.Register(ctx, propMsg.TXID, p.cfg.CallbackURL); err != nil {
+		if err := p.merkleClient.Register(ctx, propMsg.TXID, p.cfg.CallbackURL, p.cfg.CallbackToken); err != nil {
 			metrics.PropagationMerkleRegisterDuration.Observe(time.Since(mStart).Seconds())
 			metrics.PropagationMerkleRegisterFailures.WithLabelValues("register_error").Inc()
 			// Surface the failure so the consumer's retry+DLQ machinery
diff --git a/services/propagation/propagator_test.go b/services/propagation/propagator_test.go
index 5ef364b..253e5f7 100644
--- a/services/propagation/propagator_test.go
+++ b/services/propagation/propagator_test.go
@@ -305,6 +305,46 @@ func handleAndFlush(t *testing.T, p *Propagator, payload []byte) error {
 	return p.flushBatch(context.Background())
 }
 
+// TestHandleMessage_ForwardsCallbackToken pins the propagator → merkle-service
+// half of the F-018 callback-auth loop: the token configured at the arcade
+// side (cfg.CallbackToken) must reach merkle-service via the /watch payload,
+// so merkle-service can attach it as Authorization on outbound delivery. If
+// this test fails, callbacks will 401 even if the inbound receiver and
+// merkle-service forwarder are both correct.
+func TestHandleMessage_ForwardsCallbackToken(t *testing.T) {
+	var gotToken string
+	merkleSrv := httptest.NewServer(http.HandlerFunc(func(w http.ResponseWriter, r *http.Request) {
+		var req struct {
+			TxID          string `json:"txid"`
+			CallbackToken string `json:"callbackToken"`
+		}
+		_ = json.NewDecoder(r.Body).Decode(&req)
+		gotToken = req.CallbackToken
+		w.WriteHeader(http.StatusOK)
+	}))
+	defer merkleSrv.Close()
+
+	teranodeSrv := newTeranodeServer(&eventLog{}, http.StatusOK)
+	defer teranodeSrv.Close()
+
+	cfg := &config.Config{
+		CallbackURL:   "http://localhost:8080/callback",
+		CallbackToken: "secret-arcade-token",
+	}
+	cfg.Propagation.MerkleConcurrency = 10
+	mc := merkleservice.NewClient(merkleSrv.URL, "", 5*time.Second)
+	tc := teranode.NewClient([]string{teranodeSrv.URL}, "", teranode.HealthConfig{FailureThreshold: 1 << 20})
+	p := New(cfg, zap.NewNop(), nil, nil, newMockStore(), nil, tc, mc)
+
+	if err := handleAndFlush(t, p, makePropMsg("abc123")); err != nil {
+		t.Fatalf("unexpected error: %v", err)
+	}
+
+	if gotToken != "secret-arcade-token" {
+		t.Errorf("expected merkle-service to receive callbackToken=secret-arcade-token, got %q", gotToken)
+	}
+}
+
 // Test 1: Registration happens before broadcast on success (single message)
 func TestHandleMessage_RegistrationBeforeBroadcast(t *testing.T) {
 	log := &eventLog{}