Key Points
- The CFTC has urged a federal judge to dismiss the lawsuit filed by the Chicago Mercantile Exchange (CME) against its approval of cryptocurrency perpetual futures.
- The Commission asserts that CME has not demonstrated any financial damage or increased competitive pressure due to the ruling.
- A decision from the judge on this motion is still pending, and the proposed order has not yet been signed.
On Wednesday, the Commodity Futures Trading Commission (CFTC) moved to have a federal judge dismiss a lawsuit from the Chicago Mercantile Exchange (CME) that challenges the agency's endorsement of cryptocurrency perpetual futures.
The CFTC contended that CME has not proven it has experienced financial detriment or heightened competition as a result of the CFTC's decision.
Myriad: Which company will IPO next? Click to make your prediction."This lawsuit is much ado about nothing," stated the legal representatives for CFTC Chairman Michael S. Selig and the Commission.
The CME initiated legal action after the CFTC categorized Kalshi’s Bitcoin perpetual contract as a future. CME argues that a contract devoid of an expiration or delivery date should be classified as a swap, thus following an improper approval route.
According to the CFTC, "CME does not dispute its ability to list this kind of futures contract—indeed, the Order and Policy Statement clarify that any CFTC-registered exchange can offer perpetual futures on digital assets. Nor does CME contest the Commission's authority to approve this type of contract. It only claims that the Commission should have classified them as 'swaps' instead of 'futures.'"
Perpetual futures, commonly known as perps, enable traders to hold leveraged long or short positions indefinitely, with funding payments among traders helping to maintain alignment with the underlying spot market prices.
Kalshi and Polymarket indicated their intentions to branch into perpetual futures back in April. On May 29, the CFTC approved Kalshi’s Bitcoin perpetual contract, allowing a product typically traded on offshore crypto platforms to enter the regulated U.S. market.
Following this, Kalshi applied to certify contracts linked to 12 altcoins, including Ethereum, XRP, Solana, and Dogecoin. The CME made its planned legal challenge public on June 18.
This contention may extend beyond just digital assets. In August, Kalshi filed to introduce a perpetual future that tracks copper prices, although the CFTC has indicated that contracts based on asset classes outside digital commodities require individual evaluation.
The CFTC's order from May permits registered designated contract markets—not just Kalshi—to list similarly structured perpetual futures tied to Bitcoin and other digital commodities. This means CME could potentially launch competing contracts, as stated by the CFTC.
BitcoinBTC · USD$81,031+4.72%24H7D1M1YYTD06:00 PM12:00 AM06:00 AM11:45 AM05:45 PM$81.3k$79.9k$78.5k$77.0k24h HighHigh$81,33224h LowLow$76,975VolVol$1.3BMarket projectionsOdds by MyriadTodayBelow $82,000Below $82k72% chanceThis weekBelow $82,000Below $82k67% chancePrice data by CoinGeckoCoinGeckoMore Bitcoin news and projections →The CFTC referenced public statements from CME executives who indicated that their clientele had not expressed a desire for perpetual futures, and that these contracts do not serve as alternatives to the company's institutional hedging offerings.
Furthermore, the CFTC highlighted CME's data showing that trading volumes in August surpassed those of May for Bitcoin, Micro Bitcoin, Ethereum, and Micro Ethereum futures, using this information to counter CME's claims of competitive harm. The court has yet to evaluate this evidence.
A ruling in favor of CME would not resolve the alleged harm, the regulator pointed out. Exchanges might still seek to classify the contracts as swaps or offer long-dated futures with similar structures.
The CFTC noted, "Despite CME's failure to claim a financial injury, CME's own statements and data confirm that the company has not sustained financial harm and is unlikely to do so in the near future."