The popularity of perpetual futures in the crypto space has been undeniable, with trading volumes reaching staggering heights. Now, as these contracts make their way into regulated American markets, Wall Street is grappling with the question of whether they represent a fleeting trend or a lasting challenge to traditional futures. Recent launches have seen impressive trading volumes, with Kalshi's perpetual futures exceeding $1 billion in just a week.
The exchange has since sought regulatory approval to expand its offerings to include gold and silver, indicating that the product's appeal may extend beyond digital assets. Perpetual futures, also known as 'perps,' differ from standard futures contracts in that they do not expire, eliminating the need for traders to close or roll over positions.
Instead, periodic funding payments help maintain the contract's price in line with the underlying asset. This product has become a cornerstone of global crypto trading, with estimated annual volumes reaching $90 trillion, according to Bank of America. The Commodity Futures Trading Commission (CFTC) has cleared Kalshi and Coinbase to offer regulated perpetual futures in the US. However, inside Wall Street, interest in perps does not necessarily translate to immediate adoption.
While discussions about perps are becoming more frequent, particularly as US regulators allow offshore markets to move onshore, most large financial institutions are still in the process of studying these products rather than preparing for major launches. Proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers, as they have the freedom to test new venues and accept operational risks without the stringent capital rules and client obligations that big banks face. The potential applications of perps extend beyond speculation, as they could help traders manage weekend risk more effectively. Traditional futures markets are closed for part of the weekend, leaving traders exposed to unforeseen events.
A liquid 24-hour perpetual market could provide a solution, enabling firms to adjust positions in real-time and use weekend prices to estimate where CME futures may reopen. Insiders argue that demand must be present to justify the commitment of capital, but the problem lies in depth, as a contract may trade continuously without necessarily allowing institutions to move large positions without impacting the market. Regulatory battles are also emerging, with questions surrounding the classification of perpetual contracts as futures or swaps, which affects margin rules and registration duties.
The debate is becoming increasingly competitive, with CME challenging the CFTC's treatment of Kalshi's bitcoin perpetuals and similar disputes potentially arising as exchanges expand perps into traditional markets. For now, Wall Street's approach remains cautious, with trading firms, regulators, and exchanges all watching the development of perps with interest, but the largest banks are unlikely to take the lead until the rules, liquidity, and infrastructure are more established.