Legal battle brews as CME targets CFTC’s perpetual futures ruling

CME Group CEO Terrence Duffy says the exchange will sue the CFTC on Thursday, arguing that Bitcoin perpetual futures approved for Kalshi and Coinbase should be classified as swaps under the Dodd-Frank Act, not futures.

The outgoing CEO, Terrence Duffy, said on Wednesday that CME will file a lawsuit against the CFTC to challenge its approval of Bitcoin perpetual futures, a move he says has been under consideration for over 8 months. 

The CFTC-CME disagreements started way back in May, when CFTC approved Kalshi’s BTCPERP contract. The product became the first regulated Bitcoin perpetual futures contract to trade in the U.S. Shortly after, Coinbase also began routing its customers to offshore perpetual markets. Kraken also went live with CFTC-supervised perps on its newly acquired Bitnomial exchange. Bitnomial exchange already listed 9 tokens, including Bitcoin, Ether, and Solana. 

CME says perpetual futures are swaps wearing a futures costume

The CME boss contends that perpetual futures meet the legal definition of a swap under Dodd-Frank, not a futures contract. He argues that the CFTC did not conduct a proper review of the applications as it normally does, claiming that the regulator failed to conduct sufficient tests for the high-risk products.

Duffy maintained that the CME held an exclusive license with every single provider of the benchmarks, meaning the CME’s index agreements would still cover any competing perpetual product, no matter what the regulators decide to call it. 

At the Piper Sandler Global Exchange & FinTech Conference earlier this month, Duffy warned that leverage as high as 50-to-1, paired with automatic liquidation engines, could blindside retail traders who don’t fully grasp how funding costs erode their positions over time.

Despite all this, the CME has publicly announced that Terrence Duffy will step down in March 2027, leaving the door open for Lynne Fitzpatrick, a longtime executive, to step in as the new chief executive. 

CFTC Chair Michael Selig doesn’t seem rattled

Just days before Duffy announced the public lawsuit, CFTC chair Michael Selig brushed off the leverage concerns, claiming that incumbents will always fear the future. Selig argued that the perps regulated by the CFTC have the same margin limits as any other futures product in the U.S.

Selig also dismissed claims that the approvals were in any way tied to political favors intended to benefit President Trump and his business ventures. He outlined several points on X, dismissing what he called “Myths about perpetual contracts.” Selig pointed out that the Commodity Exchange Act does not necessarily require an expiration date. He added that neither the Statue nor the CFTC defines a “futures contract” that narrowly. 

A day later, Selig confirmed the agency will keep reviewing perpetual listings one asset at a time, according to Cryptopolitan.

The markets are already reacting to these developments, with shares of CME, Cboe Global Markets, and Intercontinental Exchange falling after the approval. Investors view the approval as a threat since trading volume is expected to migrate towards perps should the products hold. 

Kalshi, for its part, says its own perpetuals generated more than $3 billion in notional volume in just over a week of beta trading.

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