The Misguided Debate Over Perpetual Futures

The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, with critics warning that these high-leverage instruments could destabilize the market. However, this criticism is misplaced, as the risk is not inherent to the perpetual futures contract itself, but rather a result of the venue's design. The venue's choices, such as leverage caps, margin rules, and default management, are what ultimately determine the level of risk. The recent deleveraging episodes in the crypto market, including the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages, rather than the perpetual futures contracts themselves. The real question is not whether perpetuals belong in regulated markets, but how a given venue is built to manage risk. Regulatory requirements, such as segregated funds and registered clearing entities, are essential for securing the baseline, but it is the venue's design that ultimately determines its ability to contain risk. The sharp objection that institutions may not want perpetuals at all is also worth considering, but it is not about risk, but rather about the mechanics of the contracts. Perpetuals may not be a replacement for regulated futures, but they can be used as a hedging tool, particularly for delta hedging, where liquidity is more important than term structure. The liquidity edge of perpetuals is structural, drawn in by retail flow, and it is this liquidity that institutions want. The question is not whether perpetuals are dangerous, but how a venue handles a default when the market is under stress. Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards. By containing risk at its source, rather than transmitting it, a venue can break the chain that turns a blown-out account into a market-wide cascade, and it is this design that ultimately determines the safety of perpetuals.