CME Group Sues CFTC Over Perpetual Future Decision That 'Went Outside the Law'
CME Group Inc. is suing the Commodity Futures Trading Commission, or CFTC, after the regulator 'went outside the law' regarding a decision to allow a new type of derivative contract to trade in the US, according to a court filing and CME chief executive officer Terrence Duffy.Duffy, who runs the world's largest futures exchange, said in an interview prior to suing the agency that a May 29 CFTC decision is beyond its scope and should require Congressional action.The CFTC approval is for a somewhat new type of futures contract that has no expiration date. The so-called Bitcoin perpetual future, or perp, which began trading June 3 on Kalshi, has seen $5.6 billion in trading volume as of June 16, according to Kalshi."That order, issued without public comment or reasoned decision making, violates the plain terms of the Commodity Exchange Act," CME said in its filing with the US District Court for the District of Columbia. CME also named CFTC Chairman Michael Selig as a defendant. "If allowed to stand, it would enable Kalshi - and any other futures exchange seeking to list similar perpetual contracts - to circumvent the strict regulatory requirements set by Congress."A CFTC spokesperson said in an emailed statement that the agency disagrees with CME and believes the suit will be dismissed."Rather than compete in the marketplace, the CME has decided to undertake lawfare against the agency and the Trump Administration's pro-innovation agenda," the email said. "Incumbents fear the future and having to compete on a level playing field."Prior to the lawsuit, the CFTC said that the derivatives industry was invited to comment on perps clearing and trading last year and that the way the contracts work won't fit every market."Congress voted in 2000 on the Commodity Exchange Act, which defines all the rules and regulations that we've lived under over the last 26 years," Duffy said in a June 10 interview with. "I say it until I'm purple in the face, they defined a futures contract (as) a contract for trade for a future delivery date."The Bitcoin perp approved by the CFTC is more akin to a swap, but it's not a future due to its lack of expiration, he said.That point was made in the lawsuit."A perpetual contract is an agreement under which parties exchange payments based on the fluctuating value of a commodity, without delivering any interest in that commodity on any fixed date," the CME suit said. "Congress contemplated derivative instruments with this form and called them swaps, in the same breath legislating special requirements to address the role swaps had played in the 2008 financial crisis."Duffy said in the June 10 interview that the CFTC "went outside the law."CME said on June 17 that Duffy will step down as CEO in March and will serve as executive chairman. Chief Financial Officer Lynne Fitzpatrick will take over the top spot at the exchange.Perps became popular in the cryptocurrency world because they are simpler to use than a traditional futures contract.The market has boomed since 2025, with a high of $86.2 trillion worth of perps trading on centralized exchanges such as Binance last year, according to CoinGecko.The CFTC has faced pressure to allow US investors to buy and sell the contracts as overseas markets came to dominate trading. In July of 2025, the regulator approved a perpetual-style contract at Coinbase that has a five-year expiration.One area of growth for perps is decentralized exchanges such as HyperLiquid, where contract volume surged 346 percent last year compared with 2024 to $6.7 trillion, according to venture capital fund a16z crypto.Kalshi spent a significant amount of time working behind the scenes with CFTC staff to address their concerns about the Bitcoin perp contract before the exchange filed for approval, Sudhir Jain, chief compliance officer and head of regulatory affairs at Kalshi, said in an interview with. Jain spoke before the lawsuit was filed by CME.He said the company believes perps are a type of future contract, that Congress doesn't need to get involved and that it's up to the CFTC as to whether the industry is allowed to comment on a proposal once it has been made.He disagreed with Duffy that the CEA is clear on how it defines a future."The futures contract is not defined in the Commodity Exchange Act, it talks about commodities for future delivery - so it's more about delivery than a particular date," Jain said.Some futures contracts are cash settled and don't include a delivery mechanism, he said.Kalshi uses what's called a funding rate to keep the value of a perp contract that lacks an expiration tied to the cash price of Bitcoin.Buyers and sellers exchange payments depending on the price moves of the contract. If the perp is higher than the value of Bitcoin's spot price, the buyer of the perp pays the seller, but if it falls the seller pays the buyer. This is meant to incentivize other investors to enter the trade on the payment side to arbitrage the price back toward the underlying cash value.Jain said Kalshi's funding mechanism is the same for all perp investors and that uniformity has been established as a vital component in what makes a futures contract."It comes down to standardization, and not whether it has an expiry date or not," Jain said. "Companies are afraid of innovation and they need a reason to complain because they are not the first one to launch this. That's where this is coming from."Duffy said pressure from the Trump administration or from the cryptocurrency side of the derivatives business may have led to the CFTC decision."My only surmise is that the industry that's on that side of it wants these products for the leverage, because the retail [traders] love the leverage," he said. "(It's) not too dissimilar in 1929 when brokers leverage 90% of the value of a stock to the average American person before the great crash."That's what I think their whole motive was, to introduce more leverage into the system, and that's a concern I have."Matthew LeisingPrice: $251.21, Change: $-1.33, Percent Change: -0.53%
