A disagreement among derivatives experts highlights a significant discussion regarding the classification of crypto perpetual contracts by U.S. regulators.
By AI Boost|Edited by Jennifer Sanasie Jun 12, 2026, 3:37 p.m. 2 min readMake preferred on ShareShare this articleCopy linkX (Twitter)LinkedInFacebookEmailMake preferred onLatest developments: The introduction of CFTC-regulated crypto perpetuals by Kalshi has rekindled an ongoing debate about definitions in financial markets.
- John Lothian and Kalshi's Udesh Jha participated in a discussion on this subject through The Policy Protocol.
- Lothian, who publishes John Lothian News, contended that perpetual contracts are akin to swaps due to their nature of recurring cash-flow payments via funding-rate mechanisms.
- On the other hand, Jha, who leads exchange analytics at Kalshi, argued that perpetuals behave more like futures since they are traded on an exchange, centrally cleared, and intended to mirror spot market conditions.
- This debate follows the recent launch of crypto perpetuals by Kalshi under the oversight of the CFTC.
The disagreement: Both sides interpret the same product from differing regulatory perspectives.
- Lothian explained that perpetuals are distinct from conventional futures because the funding-rate payments generate continuous cash flows among market participants, a characteristic he aligns with swaps.
- Conversely, Jha maintained that funding rates merely clarify financing costs instead of embedding them in futures pricing, making perpetuals a more efficient alternative within the existing futures market.
- Jha also mentioned that perpetuals eliminate the necessity for traders to roll over positions into subsequent contract months, thereby minimizing friction and costs.
Why it matters: How these contracts are classified could influence access and regulatory rules for potential users.
- Lothian pointed out that categorizing perpetuals as swaps might necessitate different regulatory treatment, potentially restricting retail investor access unless legislative or regulatory changes are made.
- Jha emphasized that by bringing perpetual trading to the U.S., local customers gain access to a product that already sees trillions in offshore activity, while also benefiting from enhanced protections and oversight.
- The resolution of this debate could have implications for customer protections, market structures, tax policies, and the competitive landscape between U.S. and foreign crypto markets.
The complication: Concerns regarding market manipulation are still unresolved.
- Lothian cautioned that the determination of funding-rate calculation periods could incentivize traders to manipulate prices during settlement times, potentially impacting large positions.
- He referred to issues raised by market participants about the vulnerability of perpetual contracts to manipulation.
- In response, Jha noted that Kalshi continuously calculates funding rates throughout the funding cycles, rather than depending on a single closing period, which he believes mitigates the risk of manipulation.
What comes next: The discussion surrounding this matter is expected to continue beyond Kalshi’s launch.
- Lothian suggested that regulators should carefully maintain the established distinctions between futures and swaps.
- Jha, however, argued that the current regulatory framework already supports the classification of perpetuals as futures and that further education for the market is essential.
- As the U.S. crypto derivatives landscape evolves, both regulators and industry players will likely keep exploring whether traditional legal definitions can accommodate new products.
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