- ▸ CME Group has sued the CFTC over perpetual futures approvals, setting up a legal fight over whether perps belong in the U.S. futures framework or should be regulated as swaps.
- ▸ CFTC Chair Michael Selig says regulated perps can help bring crypto derivatives activity onshore, while CME CEO Terry Duffy argues the agency ignored Dodd-Frank.
- ▸ Kalshi is at the center of the fight after its newly approved crypto perps generated $5.5 billion in trading volume during their first two weeks, according to Bloomberg.
CME Group sued the Commodity Futures Trading Commission (CFTC) and Chair Michael Selig on Thursday over the agency’s approval of perpetual futures, escalating a fight over whether a fast-growing crypto derivatives product belongs in the U.S. futures market or should be regulated as a swap.
CME Chairman and CEO Terry Duffy previewed the lawsuit Wednesday on CNBC’s Fast Money, saying the exchange operator planned to file the lawsuit Thursday. Duffy argued that the CFTC misclassified perpetual futures when it approved them as futures contracts, saying CME’s case will focus on the Dodd-Frank Act and the recurring payments between traders that are used to keep the contracts tied to spot prices.
“When there’s two parties exchanging payments to each other, that’s deemed a swap,” Duffy said. “So, if anything, these products that he supposedly approved as futures are not futures. They would be swaps.”
A CFTC spokesperson called the lawsuit “frivolous” and said CME had chosen “lawfare” instead of marketplace competition, Reuters reported.
Perpetual futures, or perps, are futures-style contracts with no fixed expiration date. Traders can keep positions open without rolling into a new contract, while regular payments between buyers and sellers help keep the contract price close to the asset’s spot price. That structure is now at the center of the dispute. The CFTC says regulated perps can fit inside the futures framework, while CME argues the funding-payment mechanism makes them swaps under Dodd-Frank.
The lawsuit comes less than three weeks after the CFTC approved Kalshi’s bitcoin perpetual futures contract, a decision that quickly became a major new growth driver for the prediction market operator.
Duffy says CFTC ignored Dodd-Frank
Duffy said CME’s case will focus on whether the CFTC ignored Dodd-Frank by approving perpetual futures as futures contracts instead of swaps.
Dodd-Frank added a broad swap definition to the Commodity Exchange Act (CEA) that covers some contracts involving future exchanges of payments tied to asset values. But the definition also excludes futures contracts, meaning the fight is likely to turn on whether Kalshi’s funding-payment structure pushes the product into the swap category or whether the CFTC reasonably treated it as a futures contract.
That ambiguity cuts both ways: CME can point to Dodd-Frank’s broad swap definition, while the CFTC can argue it has discretion to classify a novel contract as a future if its reasoning is sound.
Duffy said the CFTC relied on older case law that predates Dodd-Frank and “circumvented” the 2010 law when it approved the products as futures. Duffy said he also believes the CFTC violated the CEA, but that CME’s lawsuit will center on Dodd-Frank.
“My suit will be based around the Dodd-Frank Act of 2010, not the Commodity Exchange Act of 2000,” Duffy said.
The distinction could have major consequences for Kalshi and other exchanges looking to offer regulated U.S. perps. When CNBC’s Melissa Lee asked whether Kalshi and other prediction markets would be unable to offer the products unless they became swap dealers, Duffy said they “would have to list them as swaps” if CME’s argument prevailed.
The complaint challenges both the CFTC’s Kalshi approval order and a related CFTC perps policy statement that CME says turned the Bitcoin approval into a broader pathway for exchanges to self-certify similar digital commodity perps without prior agency approval.
Duffy said CME is not trying to pick a fight with the CFTC, but wants the agency to clarify the legal framework before exchanges build more products around it.
“I need to understand what the rules of the road are first before I list anything,” Duffy said. “I don’t think the rules of the road are very clear.”
Selig says CFTC is bringing offshore innovation onshore
The CFTC’s Selig has defended the approvals as part of a broader effort to bring crypto derivatives activity into regulated U.S. markets instead of leaving it to offshore platforms.
Asked Monday on CNBC’s Fast Money about opposition to perpetual futures, after Duffy had publicly criticized the approvals, Selig framed the dispute as a clash between incumbent exchanges and offshore crypto innovation.
“Incumbents are always going to fear the future, but we’re looking forward,” Selig said. “We saw this product flourishing offshore. The product has been around for a very long time.”
Selig also rejected the argument that a futures contract must have a fixed expiration date. He said the CEA uses the term “contract for future delivery,” and that courts and the commission have interpreted that language over time.
“The Commodity Exchange Act does not define the term futures contract,” Selig said. “Actually, believe it or not, the term is not used in the act.”
Selig pointed to Hyperliquid and other offshore platforms as examples of crypto derivatives innovation already happening outside the U.S. He said those platforms have offered novel products that can affect U.S. markets, arguing that the CFTC needs to move faster if it wants that activity to develop inside the U.S. regulatory system.
“If we don’t create a regulated path here in the U.S., then the markets will just split offshore,” Selig said. “These markets will develop, they won’t develop in the U.S. perhaps, but they will develop offshore, and U.S. persons will find ways to access them.”
Selig rebuts “myths” around perps
Selig also used an X thread Monday to push back on what he called “misconceptions” about perpetual futures, addressing several of the same criticisms Duffy has raised publicly.
One criticism of perps is that they can expose retail traders to high leverage, meaning traders can control positions far larger than the cash they put up. Duffy has warned that leverage and auto liquidations could create risks for retail traders and broader markets.
Selig said that concern conflates offshore crypto perps with products listed on regulated U.S. exchanges.
“The extreme leverage often associated with the perpetual contract structure is a hallmark of the offshore venues where these products have traded since their creation and, importantly, is not in any way inherent to the contract structure itself,” Selig wrote. “CFTC-regulated perpetuals are subject to the same leverage limitations as other CFTC-regulated futures contracts.”
Selig made a similar point on CNBC when asked whether average investors may not understand funding rates or the costs of holding a perp position. He said perpetual futures are “just another type of novel derivative instrument” and compared the complexity to other products already in the market.
“We’re going to regulate them,” Selig said. “We’re going to make sure the terms are out there. We’re gonna make sure there’s proper disclosure.”
The thread also answered criticism of the funding-rate mechanism. Duffy has argued that funding payments between traders can distort incentives and make perps less useful as forward hedging tools than dated futures. Selig said the opposite, arguing that funding rates help keep the contract linked to the underlying market.
“Far from incentivizing bad behavior, the funding rate mechanism is a disciplining feature that keeps the instrument tethered to the underlying cash market,” Selig wrote.
Selig also pushed back on claims that the CFTC did not give the industry a chance to comment. He said the agency sought public comment in April 2025 on perpetual contracts and 24/7 trading and received more than 100 comments.
CME’s complaint counters that the agency did not address those comments or issue a final rule before approving Kalshi’s application one day after it was submitted.
Kalshi perps rollout shows the stakes
Bloomberg reported this week that Kalshi’s perpetual futures generated $5.5 billion in trading volume in their first two weeks, while CFTC filings show KalshiEX followed its Bitcoin approval with more than a dozen additional certified crypto perp contracts, which are now open to public trading.
The filings show how quickly the CFTC’s May 29 approval moved from a single Bitcoin contract into a broader crypto perpetuals rollout. Kalshi’s perps page currently shows live markets for Bitcoin (BTC), Ether (ETH), HYPE, Solana (SOL), XRP, Chainlink (LINK), Sui (SUI), Bitcoin Cash (BCH), Shiba Inu (kSHIB), Litecoin (LTC) and Dogecoin (DOGE).
The largest markets are already posting significant daily volume. By early afternoon on Thursday, Kalshi’s perpetuals page showed $1.22 billion in 24-hour volume for BTC PERP and $562.7 million for ETH PERP, with HYPE PERP, SOL PERP and XRP PERP also showing eight-figure daily volume.
That volume is separate from Kalshi’s core event contract business, where the company is best known for markets tied to sports, politics, economics, entertainment and other real-world outcomes. The perp rollout gives Kalshi a major new trading product outside its original prediction market lane.
Kalshi CEO Tarek Mansour framed the pushback as a predictable response from established market operators. Speaking Tuesday at Bloomberg’s Market Structure Conference, Mansour said new products often draw resistance when they challenge incumbent businesses.
“Sometimes pushing the frontier I think is going to bring opposition,” Mansour said, according to Bloomberg. “You have incumbent participants that have a status quo that’s working, and there’s competition now.”
CME’s complaint turns that competition point into part of its legal case. The exchange argues Kalshi’s crypto perps directly compete with CME’s retail crypto futures products, including Micro Bitcoin and similar contracts tied to Ether, Solana, XRP, Chainlink and Sui. The complaint also cites Kalshi statements describing perpetuals as simpler for retail traders because they do not expire, while adding competitive pressure on CME’s futures rollover fees.
Duffy says fight is not about avoiding competition
Duffy rejected the argument that CME is simply trying to protect its own business from new competition. In an earlier CNBC appearance, he said the issue is whether regulators are creating a framework for highly leveraged products that retail traders may not fully understand.
Duffy also argued that traditional futures markets serve a risk-management function for farmers, energy producers, banks and other market participants, while perpetuals are more speculative.
“I don’t want casinos in exchanges,” Duffy said. “I want to have products that people need to trade.”
CME’s lawsuit came the day after CME announced that Duffy will step down next year as CEO and become executive chairman, with Lynne Fitzpatrick set to become CEO. Duffy said the succession plan had been in the works for months and was not a response to the perpetual futures fight.
“I’m always up for a good battle,” Duffy said during this week’s CNBC interview. “I’ve never shied away from one, and I won’t shy away from this.”
The lawsuit could now test how far the CFTC can go in bringing crypto-native derivatives into the U.S. futures system through product approvals. For Kalshi, the fight could determine whether one of its fastest-growing new product lines stays in the futures lane or faces a more complicated path under swap rules.
