Crypto perps face renewed scrutiny after watchdog flags retail risks

While retail investors are pushing unprecedented volumes of trade through crypto perpetual futures, consumer advocacy organizations are quietly working to shape the regulatory framework governing one of the most high-risk products.

Instead of just lobbying to Congress, these organizations are influencing the regulatory process through submitting comment letters, filing court briefs, and pushing regulators to impose greater restrictions on the industry before rules are finalized.

One of the most active groups is Better Markets, a Washington-based nonprofit led by former Skadden attorney Dennis Kelleher.

According to its website, the organization has submitted more than 500 comment letters to financial regulators and self-regulatory bodies, with its recommendations cited more than 180 times in final rules. It also regularly files court briefs supporting tighter financial regulation.

How advocacy groups get written into the rules

Better Markets has sought to be a countervailing force to Wall Street in the policymaking process by engaging with the White House, Congress and federal regulators.

One of its most recent activities involved writing a comment letter on July 2026, in which Better Markets opposed the proposal made by National Credit Union Administration regarding crypto-related risks. The Director of Banking Policy, Christopher Appel has stated that the proposal could expose credit unions to crypto-related risks without adequate safeguards.

Christopher Appel said:

“The NCUA’s GENIUS Act stablecoin proposal repeats the same mistakes Better Markets has already identified with the OCC, FDIC, and Treasury stablecoin proposals—no meaningful capital or liquidity standards, inadequate reserve diversification requirements, and a failure to address the significant financial stability risks associated with stablecoins.

Although the letter does not directly address perpetual futures, it demonstrates how advocacy organizations promote regulations long before they are enacted.

Advocacy organizations can affect the wording of federal regulations through formal comments, lawsuits, and continuous communication with relevant authorities. For crypto perpetual futures still largely eluding direct regulation by US authorities, early regulation may be particularly useful.

Why regulators are watching the perps boom

As perpetual futures trading has emerged as one of the most significant segments of the crypto market, the regulators are taking notice.

Perpetual futures are a type of derivative that has no expiry date, allowing traders to keep their leveraged positions indefinitely by means of a funding-rate mechanism that ensures prices remain in line with the underlying spot market, according to Chainalysis.

Cornell University’s research indicates that approximately 93% of trades conducted in the field of crypto derivatives involve perpetual futures. As reported by venture capital firm a16z, centralized exchanges processed $86.2 trillion in perpetual futures volume last year (a 47% increase compared to the previous year), while decentralized exchanges registered trading volumes of $6.7 trillion (346% increase).

The Financial Times called perpetual futures the “most dangerous product in crypto,” which indicates the growing concern about the risks they pose to retail investors.

Where the risk actually sits for retail

Consumer advocates maintain that the main risks associated with crypto perpetual futures include:

• High leverage: Some platforms allow leverage of up to 100×, meaning a 1% adverse price move can wipe out an entire margin position.
• 24/7 trading: Unlike traditional futures markets, crypto perpetuals trade continuously, increasing the risk of overnight or weekend losses when traders cannot actively monitor positions.
• Automatic liquidation: Positions can be liquidated automatically once margin requirements are breached, often without giving traders time to add collateral during periods of sharp market volatility.
• Funding-rate costs: Because perpetual futures have no expiration date, traders pay or receive periodic funding payments to keep contract prices aligned with the underlying spot market. These recurring costs can significantly reduce returns or increase losses, particularly when positions are held for extended periods.

There are many trading platforms that have leverage from 1x to 100x or more. Chainalysis says that a highly leveraged position can be liquidated in seconds during rapid price movements, resulting in traders losing large amounts of money.

The Cornell university team also discovered that while there is an increase in liquidity in the markets with the introduction of perpetual futures, the mechanism of the funding rate together with the extensive usage of leverage leads to increasing costs over time. In the earlier report by Cryptopolitan the advocates expressed their worries about the combination of high levels of leverage, around-the-clock trading, and auto-liquidation systems as they can lead to fast wipes of retail investors’ positions before they have a chance to take any action.

Why US rules stay unsettled

The method in which perpetual futures should be regulated is still a question for discussion.

Chainalysis states that most of the trading that is done on perpetual futures takes place at offshore exchanges that are not under the jurisdiction and authority of US regulators. In another vein, a16z claims that centralized and decentralized platforms do not allow US customers to use actual perpetual futures products. This means that the Commodity Futures Trading Commission has limited power to enforce any regulations as trading continues to grow.

The idea behind this product is not new. The concept was first suggested by economist Robert Shiller in 1993 and BitMEX made crypto perpetual futures popular in 2016. But, the regulatory environment has not adjusted accordingly.

As retail involvement rises and RWA perpetual futures account for 44% of trading volume on exchanges such as Hyperliquid, it is increasingly difficult to ignore the disparity of where these assets are traded versus where regulators have jurisdiction—and consumer advocates are looking to fill that gap.

This combination of leverage, continuous trading, automatic liquidations and ongoing funding costs has made perpetual futures one of the most debated products in the crypto derivatives market, with consumer advocates arguing that many retail investors may not fully understand the risks before trading.

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