TL;DR
Coinbase, Kraken, Kalshi and other firms have backed the CFTC in a lawsuit seeking to stop U.S. trading in perpetual contracts tied to individual stocks. Their court filing argues the contracts are futures, not securities-based swaps; a separate CME Group case makes a related argument about crypto perps. The litigation remains unresolved, and a judge has allowed stock-perp trading to continue for now.
Coinbase, Kraken, Kalshi and other firms have joined the Commodity Futures Trading Commission’s side in a federal lawsuit over whether single-stock perpetual contracts should be treated as futures or securities-based swaps. The filing backs the CFTC’s effort to allow the products in the United States and puts crypto-industry companies in alignment with the regulator in a dispute brought by traditional securities firms.
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The brief, filed late Monday in the U.S. District Court for the Southern District of New York, argues that perpetual contracts tied to individual stocks belong in the category of security futures, not securities-based swaps. The signatories include Coinbase, Kraken, Kalshi, Paradigm, DRW Holdings and Jump Trading. They contend the CFTC and Securities and Exchange Commission have both treated security futures as falling within their regulatory framework.
The lawsuit was brought by the Capital Markets Alliance, a new organization backed by Citadel Securities, Cboe and other traditional finance firms. The group asked the court for emergency relief to halt U.S. trading in single-stock perps, arguing that the contracts are securities-based swaps subject to SEC jurisdiction and that the CFTC has exceeded its authority by treating them as futures.
Perpetual contracts have no expiration date and allow traders to speculate on an asset’s price movements over time. The court has allowed trading to continue while the stock-perps case proceeds, though the judge indicated that the alliance’s argument about the CFTC’s authority may have merit. That is not a final decision on the classification or legality of the products.
Two Perps Cases, One Regulatory Divide
The stock-perps filing marks a second legal dispute in which established financial firms are challenging how the CFTC treats perpetual contracts. The first is a separate case brought by CME Group over crypto perps. The cases share a central question—whether products called perpetuals should be regulated as futures or swaps—but the consequences differ because the underlying assets and regulatory arrangements are not the same.
In the stock case, the industry signatories say the contracts are security futures and that the CFTC and SEC have roles in regulating them. The Capital Markets Alliance says they are securities-based swaps within the SEC’s jurisdiction. In the CME dispute, CME’s position is also that crypto perps are swaps, but the CFTC would retain jurisdiction over those products under that framing, subject to a different set of rules than futures.
The cases matter to U.S. platforms, traders and market operators because the eventual classification could affect which rules apply and whether the products can be offered domestically. At this stage, the court has not settled those questions. The companies’ arguments are positions in ongoing litigation, not findings that the products are legally futures or that trading will remain available.
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How the Two Lawsuits Connect
The CFTC has sought to create a U.S. path for perpetual contracts, first in the crypto market and now for contracts linked to single stocks. Traditional finance firms have challenged those efforts in court, asserting that the products fit the definition of swaps rather than futures. The disputes therefore concern both the regulator’s authority and the rules that would apply if the contracts are offered.
The crypto firms’ role differs between the cases. In the stock-perps lawsuit, they have directly filed arguments supporting the CFTC’s futures classification. In the earlier CME Group case over crypto perpetuals, the CFTC has been defending its position against the exchange’s challenge; the crypto industry has not, according to the report, taken the same direct role in that litigation so far.
The latest brief says conventional securities firms could offer what the signatories describe as a better product themselves, but instead sought emergency relief to keep it off the market. That is the signatories’ characterization of the alliance’s lawsuit, not an independent finding by the court.
“The question, then, is not whether equity perpetuals resemble security-based swaps, but whether they are security futures — and they are.”
— Crypto and prediction-market firms signing the court brief
Classification Rulings Still Pending
No final ruling has resolved whether single-stock perpetuals are futures or securities-based swaps. Although trading has been allowed to continue in the Capital Markets Alliance case, the judge’s stated view that the group’s argument may have merit signals that the challenge remains live; it does not establish that the CFTC acted outside its authority.
The separate CME case also remains unresolved. The CFTC has asked the court to dismiss it, but the matter is awaiting judicial action, according to the report. The available information does not specify a hearing date or explain what relief, beyond the alliance’s request for an emergency halt, might be considered next.
It is also unclear how any decision in either case would affect other types of perpetual contracts, platforms, or products not directly at issue. The disputes concern different underlying assets and legal arguments, so their outcomes should not be assumed to match.
Courts To Consider Both Challenges
The immediate next step is further court proceedings in the Capital Markets Alliance’s stock-perps lawsuit, where the judge has permitted trading to continue for now. The court will need to address the alliance’s challenge to the CFTC’s authority and the competing arguments over whether the contracts are futures or securities-based swaps. The source report gives no date for the next ruling or hearing.
In the CME Group case, the court still has to act on the CFTC’s request to dismiss the lawsuit. Until judges issue decisions, the industry’s filings and the regulator’s arguments remain positions in active cases. Any change to trading access or regulatory treatment will depend on subsequent court orders and developments in the proceedings.
Key Questions
What are single-stock perpetual contracts?
They are contracts linked to the price movement of an individual stock that have no expiration date. Traders use them to speculate on the stock’s price, but the lawsuit concerns how regulators should classify and oversee them.
Which companies are backing the CFTC in the stock-perps case?
The court brief includes Coinbase, Kraken, Kalshi, Paradigm, DRW Holdings and Jump Trading, among others. They argue that the contracts should be treated as security futures rather than securities-based swaps.
Who is challenging the CFTC’s approach?
The Capital Markets Alliance, backed by Citadel Securities, Cboe and other traditional finance firms, sued to halt U.S. trading in single-stock perps. It argues that the products are securities-based swaps and that the CFTC is overstepping its authority.
Has a court banned stock-perp trading?
No. The judge initially allowed trading to continue in the alliance’s case. The court has not issued a final ruling on the products’ classification or the CFTC’s authority.
How is the CME case different?
CME Group’s separate case concerns crypto perps, not single-stock contracts. CME argues that crypto perps should be classified as swaps, while the CFTC has sought dismissal. The case is still awaiting judicial action, and its outcome is not settled.
Source: coindesk.com
