At a glance

  • The Commodity Futures Trading Commission (CFTC) said on Tuesday that perpetual futures on individual US stocks can trade for the first time on exchanges registered with both the CFTC and the Securities and Exchange Commission (SEC).
  • On the same day the Capital Markets Alliance, whose members include Cboe Global Markets and Citadel Securities, sued in federal court in New York to have the approvals thrown out.

The announcement came in a statement from CFTC Chairman Michael Selig, circulated with Release 9319-26. A perpetual future is a derivative with no expiry date, so a position can be held without being rolled into a new contract.

Selig said the contracts, which he calls “Equity Perps”, were deemed approved under CFTC Regulation 40.3. That means the agency’s review period ran out without an objection. They were approved as security futures products under the Commodity Futures Modernization Act of 2000, so the Commodity Exchange Act, federal securities laws and the rulebooks of both agencies all apply.

Who can list them

A footnote limits the approval to designated contract markets that are also notice-registered with the SEC as national securities exchanges for security futures. The statement does not name any exchange or stock.

Kalshi, Coinbase Derivatives and Bitnomial have filed rules for such contracts, Bankless reported. The lawsuit is aimed at those three venues’ contracts, according to The Defiant.

Selig presented the step as an extension of the bitcoin perpetual the CFTC approved for KalshiEX on 29 May and of the CFTC-SEC memorandum of understanding signed on 11 Mar. He said bringing the products onshore lets US traders use them “within the protections of the CFTC’s proven regulatory framework, rather than being forced to turn to offshore, and often unregulated, venues.”

What the lawsuit says

The Capital Markets Alliance filed in the US District Court for the Southern District of New York, its announcement says. The group’s case under the Administrative Procedure Act is that the products are security-based swaps, a category Congress gave to the SEC alone.

It also argues that the CFTC gave no explanation for the approvals, did not address its own long-standing treatment of perpetuals as swaps, and did not weigh the effects on investors and securities markets. The group wants the court to vacate the approvals, declare the products security-based swaps and stop the CFTC from giving the approvals effect while the case runs.

“The hasty roll out of financial products that circumvent well-established regulatory frameworks erodes investor protection,” said Adam Ford, the alliance’s secretary. Cboe, whose statement lists Healthy Markets Association as the third member, said the issue was investor protection rather than competition. “If this were simply a commercial issue, Cboe could bring these products to market on CFTC regulated trading and clearing platforms that it operates,” Chief Executive Craig Donohue said.

The CFTC’s response

A CFTC spokesperson called the suit “troubling” interference with CFTC-regulated markets, Reuters reported. “Our markets should be governed by law, not litigation campaigns intended to block innovation,” the spokesperson said. The SEC did not respond to Reuters’ request for comment.

This is the second court challenge to the CFTC’s perpetuals policy. CME Group’s case against the bitcoin perpetual order is still pending in Washington, where the agency has argued that CME’s own volumes undercut its perpetual futures suit. Other routes onshore are also being tried: in October ICE agreed to run Hyperliquid-based perpetual markets for US retail traders.

What happens next

The New York court must first decide whether to grant the interim relief the alliance is seeking. No venue had posted a launch date for single-stock perpetuals as of Tuesday, Bankless reported. In the CME case, cross-motions for summary judgment are due on 20 Nov.

This article is for information only and is not investment advice.