CFTC tells court CME lacks standing on perpetual futures

The CFTC CME perpetual futures dispute moved to the question of standing on Friday, Oct. 16. In a brief to a federal court, the Commodity Futures Trading Commission argued that CME Group has failed to demonstrate any injury from the agency's decision to allow perpetual contracts, and so has no right to challenge it.

What happened

"Allegations of increased competition, without any plausible inference of an imminent financial injury," do not give CME standing, the agency wrote, CoinDesk reported. It added that crypto futures volume at CME has risen since the policy change. "CME must plausibly allege an actual or imminent increase in competition," the CFTC said. "CME has not even done that."

The regulator also used CME's own messaging. It said the exchange had told investors it saw little demand for perps and that they were not substitutes for its futures. "CME cannot have it one way with the court and another way with the investing public on earnings calls," the brief said.

The filing builds on a motion to dismiss the case that the CFTC lodged in September. CME did not immediately respond to requests for comment. The company argues that perps, which have no expiry date, are really swaps rather than futures and should fall under a different regulatory regime.

Why it matters

The stakes are large for U.S. crypto markets. Perpetual contracts let traders take leveraged positions without rolling an expiring contract, and they became a major form of crypto derivatives trading offshore. The CFTC opened the door in May with approval of Kalshi's bitcoin perp, the first in the U.S., and said it would review other perps case by case as futures.

The agency's May 29 policy statement, issued alongside an order permitting a bitcoin-referenced perpetual as a futures contract, said perps vary with the asset they track. It concluded that the case-by-case review under Commission Regulation 40.3 is appropriate for perpetual contracts on asset classes the order did not cover.

Venues have been building on that opening, as our reports on a Kalshi WTI perpetual and Robinhood's crypto perpetuals described. A ruling for CME would push such contracts toward the swaps regime, an entirely different regulatory approach for exchanges and brokers.

Not everyone expects the agency to win. Jaret Seiberg, a policy analyst at TD Cowen, wrote in a Monday note that CME may still have the edge on standing as a competitor and on the argument that perps are swaps. "What increasingly concerns us is the growth in perps while the litigation is playing out," he wrote.

What's next

The court has not set a date for a ruling on the motion to dismiss. If the judge accepts the CFTC CME perpetual futures standing argument, the case could end before the merits are heard. If not, the classification question goes forward while volumes keep growing.

Seiberg warned that continued growth could make the market hard to unwind if CME prevails. The agency's original reasoning is set out in its policy statement on perpetual contracts, issued alongside the bitcoin perp order. For now, the CFTC CME perpetual futures fight is a legal overhang on one of crypto's fastest-growing products.