CME Group CEO Terry Duffy argues that crypto perpetual futures should be classified as swaps rather than futures contracts. This classification would subject these products to stricter regulatory standards established after 2008. The exchange initiated legal action against the Commodity Futures Trading Commission (CFTC) to enforce this distinction.
The dispute stems from the CFTC's decision on May 29 to approve a Bitcoin perpetual contract from the prediction market platform Kalshi. Duffy contends that the funding rate mechanism, which aligns perpetual prices with spot prices, meets the legal definition of a swap. He also noted that perpetuals are primarily retail-oriented products.
CME reported that institutional traders accounted for 94% of its volume during the first half of the year. While the exchange claims that Kalshi’s offerings target its own retail user base, the CFTC filed a motion to dismiss the lawsuit on September 2, arguing that CME lacks standing because it is eligible to list similar contracts itself.
Legal experts at Cahill suggest that the classification of these contracts impacts how customer collateral is protected and influences tax treatment. Duffy expressed concerns regarding the lack of formal rules, noting that some offshore platforms offer leverage as high as 250x. Kalshi CEO Tarek Mansour stated that their contracts offer approximately 6x leverage.
