US CFTC Allows Perpetual Futures on Individual Stocks; Exchanges Sue
Summary
- The US CFTC said it would classify perpetual futures tied to individual stocks as security futures and allow them to trade.
- Cboe, Citadel Securities, and CME Group have filed lawsuits challenging the approval process and regulatory framework.
- New entrants including Kalshi, Coinbase, and Bitnomial are preparing related products and are counting on broader competition.
Forecast Trend Report by Period
The US Commodity Futures Trading Commission has allowed trading in perpetual futures tied to individual stocks, prompting a backlash from parts of the financial industry.
Bloomberg reported on November 3 that CFTC Commissioner Caroline Pham said stock-based perpetual futures contracts would be classified as security futures and allowed to trade. The products will be subject to oversight by both the CFTC and the Securities and Exchange Commission.
Perpetual futures are derivatives that, unlike standard futures, do not expire and allow investors to use leverage to bet on moves in the underlying asset. They can trade even when the stock market is closed, helping drive their popularity overseas, though concerns over volatility and investor protection have persisted.
Pham said the move could give US investors a new tool for risk management and price discovery. The CFTC earlier this year approved perpetual futures tied to digital assets and is now expanding the scope to stock-related products.
Existing exchanges, however, have challenged both the approval process and the regulatory framework. The Capital Markets Alliance, whose members include Cboe Global Markets and Citadel Securities, filed suit in federal court in New York seeking to halt trading, arguing that the CFTC failed to comply with the Administrative Procedure Act.
Cboe Chief Executive Officer Craig Donohue raised concerns that stock-linked derivatives could trade on CFTC-regulated platforms without appropriate securities regulation and investor safeguards. CME Group had previously sued the CFTC as well, arguing that perpetual futures should be classified as swaps rather than futures.
New entrants seeking access to the market welcomed the decision. Prediction-market platform Kalshi applied in September to list perpetual futures on individual stocks, while Coinbase and Bitnomial are also preparing related products. Andy Ross, Kalshi's head of institutional business, criticized the lawsuit as an effort by incumbent firms to block broader competition.
The debate has also spread to Washington over investor protection. Republican Senator Katie Britt called for joint oversight by the SEC and CFTC, while Democratic Senator Elizabeth Warren warned that stock perpetual futures could increase volatility in financial markets.
