Just as the U.S. cryptocurrency perpetual contracts were opening up to compliance, a dispute over regulatory classification has already entered the courts. CME Group has sued the U.S. Commodity Futures Trading Commission (CFTC), alleging that the agency circumvented congressional procedures for the swaps market when approving the listing of related products on platforms such as Kalshi.
The controversy centers on classification
According to Bloomberg, CME stated in its complaint that the CFTC's classification of crypto perpetual contracts as futures, rather than swaps under the Dodd-Frank Act, alters the existing regulatory approach.
CME believes that perpetual contracts are not standard futures. Because these products do not have a traditional expiration date and are closer to a swap structure, they should not follow the approval path of ordinary futures.
CME also claims that the CFTC's approval, which did not follow a formal rule-making process, effectively opens a new channel for the US perpetual contract market. The complaint also names CFTC Chairman Michael Selig, alleging that his approval decision violates existing congressional definitions.
Kalshi products become the focus
At the heart of this controversy is Kalshi's Bitcoin perpetual futures contract. The CFTC approved the product on May 29, stating that BTCPERP could continue to be listed and traded as long as it complies with the Commodity Exchange Act and existing regulatory rules.
The CFTC also stated that perpetual structures may not be suitable for all asset classes, and subsequent products will still be reviewed on a case-by-case basis.
Kalshi subsequently expanded its product range from Bitcoin to more crypto assets, adding perpetual contracts pegged to Ethereum, XRP, and Hyperliquid. The platform disclosed that within weeks of its launch, this service had accumulated over $5.5 billion in trading volume.
Furthermore, Coinbase has also secured a pathway to launch some regulated crypto perpetual products in the US through its infrastructure related to Deribit. This means that the US perpetual market, long dominated by offshore platforms, is seeing the emergence of compliant domestic competitors.
The outcome of the lawsuit remains uncertain.
CME CEO Terrence Duffy previously stated in an interview with CNBC that the company is prepared to take legal action. He believes that even if the relevant products adopt a perpetual structure, they should be handled within the CME system because CME has exclusive agreements with some benchmark providers.
However, the legal community does not necessarily believe that CME has the upper hand. StarkWare's General Counsel, Katherine Kirkpatrick, wrote on June 18 that the CFTC has treated perpetual products as swaps in past enforcement cases against Binance, but the enforcement stance itself does not automatically set a precedent.
She also stated that federal law does not necessarily require the CFTC to complete a decision within 45 days, nor does it necessarily require the commission to have a quorum before it can act; therefore, the chair may have the authority to independently approve new products.
Regarding competition damage, she believes CME still needs to prove it suffered actual harm. Even without this approval, offshore perpetual trading platforms have always been competing with CME.
Additional information:In addition to regulatory classification, the complaint also raises issues of intellectual property and benchmark licensing. CME argues that some of the products in question involve exclusive agreements between CME and benchmark providers.
