Are Perpetuals Swaps? Breaking Down the CME Lawsuit in Crypto Markets

CME Group filed a lawsuit against the CFTC on Thursday, arguing that the regulator improperly approved Kalshi’s first U.S.-listed perpetual futures product. The exchange is asking the court to overturn both the approval and the related self-certified contracts.

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Futures or Swaps?

The Narrative

CME Group’s complaint centers on the claim that the CFTC failed to adequately evaluate Kalshi’s application to list perpetual futures before granting approval. The legal action follows comments from outgoing CEO Terry Duffy, who said a day earlier that CME planned to challenge the decision made at the end of May.

Why It Matters

It’s highly unusual for a firm like CME to take legal action against its primary regulator. Perpetual futures, or “perps,” are a relatively new class of derivatives, closely tied to crypto markets. CME’s case focuses on procedural shortcomings, arguing that the CFTC’s approval process violated Dodd-Frank rules and could negatively impact its business.

Breaking It Down

CME contends that perpetual contracts threaten its traditional long-dated futures offerings. The lawsuit argues that the CFTC overlooked key implications and misclassified these instruments, asserting that perps should be treated as “swaps” under the Dodd-Frank Act rather than “futures.”

This distinction is significant because each classification carries different regulatory requirements for both the products and the firms offering them. CEO Terrence Duffy recently told CNBC that how these instruments are defined determines the rules market participants must follow.

In the filing, CME stated that the CFTC did not conduct a proper legal analysis to determine whether approving Kalshi’s Bitcoin perpetual contract as a futures product aligns with existing law. The complaint notes that the regulator did not reference the Dodd-Frank definition of a “swap” at all, suggesting a lack of thorough review.

Instead, CME alleges, the CFTC effectively approved Kalshi’s application without sufficient scrutiny.

At the same time, the broader market for perpetual products is expanding quickly. On the same day Kalshi received approval, the CFTC issued a no-action letter to Coinbase, potentially allowing it to offer similar products—likely through an offshore structure.

Perpetual futures remain a relatively new financial instrument and were not explicitly contemplated in the Dodd-Frank framework, which adds complexity to the regulatory debate.

Former StarkWare general counsel Katherine Kirkpatrick Bos noted in an email that while “swap” is clearly defined under Dodd-Frank, “future” is not. This gives the CFTC some discretion in classifying new products based on their characteristics. CME, however, argues that the absence of an expiry date should disqualify perps from being considered futures.

Bos also pointed out there is no clear precedent establishing that “future delivery” is a necessary condition for a contract to qualify as a futures product.

This Week

Tuesday
14:00 UTC (10:00 a.m. ET): The Senate Banking Committee will hold a hearing on “The Affordability Agenda,” featuring Consumer Bankers Association CEO Lindsey Johnson, National Association of Realtors President Kevin Brown and Digital Chamber CEO Cody Carbone.

Wednesday
14:00 UTC (10:00 a.m. ET): The House Financial Services Committee will host a hearing titled “Future of Payments.” Speakers have yet to be announced.

Thursday
14:00 UTC (10:00 a.m. ET): The House Financial Services Committee will hold a hearing on “The Future of How America Invests.” Speaker details are pending.
18:00 UTC (2:00 p.m. ET): The House Oversight Subcommittee on Military and Foreign Affairs will conduct a hearing focused on digital currencies.

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