CME Challenges CFTC Approval of Bitcoin Perpetual Futures

The Chicago Mercantile Exchange (CME) is suing the Commodity Futures Trading Commission (CFTC) to overturn its approval of Kalshi's Bitcoin perpetual futures and a related policy statement. This move could potentially vacate the approval and reset the regulatory framework for perpetual futures in the US.

The CFTC approved Kalshi's Bitcoin perpetual futures on May 29, along with a policy statement that allows for the use of perpetuals in US markets. The CME argues that this decision was made without proper process and could upend the competitive landscape.

Perpetual futures are a type of derivative that does not expire, but instead uses funding payments to keep the price aligned with spot prices. This has mostly been done offshore, but a regulated perpetual in the US could attract volume and reshape how crypto liquidity behaves over weekends and holidays.

The CFTC is also taking steps to protect its authority over contract markets, suing the State of Kentucky to block state actions that interfere with its exclusive authority. The agency has also opened a Request for Comment on extending standard futures to 24/7 trading and considering perpetuals referencing physically delivered or storable energy commodities.

Regulated perpetuals could bring new entrants, more experimental contract designs, and eventually 24/7 infrastructure across more assets. However, this would require exchanges to adapt to a new framework and potentially face heavier operational loads under 24/7 trading.