Wall Street Challenges CFTC Over Stock Perpetual Futures Rules

Traditional financial institutions and crypto venues have entered a legal battle over perpetual futures tied to individual stocks following regulatory clearances issued by the Commodity Futures Trading Commission (CFTC).

Applications from KalshiEX, Coinbase Derivatives, and Bitnomial were deemed approved on Nov. 2, with the CFTC announcing the equity perpetual framework on Nov. 3. The regulator classified the contracts as security futures subject to joint oversight with the Securities and Exchange Commission (SEC). However, the Capital Markets Alliance Association—representing established firms including Cboe and Citadel Securities—filed a federal lawsuit in New York to challenge the decision.

Court Refuses Halt Despite Legal Doubts

In Capital Markets Alliance Association v. Commodity Futures Trading Commission, plaintiffs argue that the indefinite life of perpetual contracts makes them security-based swaps governed by a different legal framework. Judge Valerie Caproni denied an emergency trading halt on Nov. 3, but stated that the challengers were likely to succeed on their statutory-authority arguments.

Industry participants have actively responded to the litigation. Six firms—including Coinbase, Kalshi, Payward, DRW, Jump Trading, and Paradigm Operations—joined a proposed industry brief on Nov. 9. On Nov. 12, advocacy group Better Markets issued an objection to the CFTC’s opposition to its brief as the underlying classification dispute remains before the court.

Contract Specifications and Rules

Unlike traditional futures with set expiration dates, equity perpetuals rely on recurring funding payments between long and short positions to align derivative prices with underlying reference stocks. Contract specifications published by exchanges highlight distinct operational parameters:

• Kalshi’s filed rules establish a 15.50% margin floor, representing roughly $6,452 of market exposure for every $1,000 committed.
• Coinbase listed a Costco equity perpetual on its product register on Nov. 5 under the security futures classification.
• Individual listings specify how derivatives adjust during market closures, corporate actions, or price dislocations.

Key facts

• Applications for stock perpetual futures by KalshiEX, Coinbase Derivatives, and Bitnomial were approved on Nov. 2.
• Capital Markets Alliance Association, including Citadel Securities and Cboe, sued the CFTC in New York federal court.
• Judge Valerie Caproni denied an emergency halt on Nov. 3 while finding challengers likely to succeed on statutory grounds.
• Kalshi set a 15.50% margin floor for its stock perpetual contracts.