Since the introduction of crypto perpetual contracts into the regulated market in the United States, controversies surrounding product classification and competition among exchanges have rapidly intensified. Jake Chervinsky, head of the Hyperliquid Policy Center, publicly criticized CME Group's lawsuit against the U.S. Commodity Futures Trading Commission (CFTC), saying that this move exposed the resistance of traditional giants to new competitors.
The controversy arose from the approval of crypto perpetuity.
In a post on June 19, Chervinsky called CME's lawsuit against the CFTC a "serious miscalculation." This followed the CFTC's approval of regulated crypto perpetual futures products by platforms including Coinbase and Kalshi, which reportedly generated over $1 billion in trading volume since their launch.
CME's core argument is that these perpetual contracts should not be treated as traditional futures, but rather as swaps under the Dodd-Frank Act. The company believes that the CFTC approved a new class of derivatives without going through the formal rule-making process established by Congress.
Hyperliquid points to market concentration
On June 18, the Hyperliquid Policy Center cited data from Better Markets stating that the CME accounts for approximately 92% of the trading volume of derivatives on US exchanges. The agency believes that excessive market concentration reduces choice and increases transaction costs.
His argument is that for many years, US traders seeking access to similar perpetual products have often had to turn to offshore platforms, with compliant versions only recently entering the US domestic market. Chervinsky believes that CME's lawsuit against regulators at this time reflects its attempt to maintain its existing advantages.
- Better Markets estimates that the CME accounts for approximately 92% of the trading volume of derivatives on US exchanges.
- US-regulated crypto perpetual products have reportedly generated over $1 billion in sales.
- The crux of the dispute lies in whether perpetual contracts should be classified as futures or swaps.
The US is simultaneously re-examining the definition of derivatives.
This lawsuit comes as U.S. regulators are also reviewing relevant legal definitions. The CFTC and the Securities and Exchange Commission (SEC) have jointly launched a public consultation to discuss how swaps, security swaps, hybrid swaps, and other derivatives should be classified under Chapter 7 of the Dodd-Frank Act.
Selig stated that this review helps address long-standing ambiguities in the law. SEC Chairman Paul Atkins also noted that further clarification of the relevant definitions has been delayed for far too long.
Currently, the joint consultation will be open for 60 days after its publication in the Federal Register. Regulators hope to use this time to gather market feedback in order to determine how modern derivatives products should be regulated under existing rules.
