After years of popularity in the crypto space, perpetual futures are officially entering the US market, with companies like Kalshi and Coinbase receiving regulatory approval to offer these contracts. The early results have been impressive, with Kalshi's perpetual futures reaching $1 billion in trading volume within a week of launch. However, despite the potential for massive retail demand, traditional Wall Street banks are hesitant to jump in, citing the need for clearer rules, more mature infrastructure, and increased liquidity.
Perpetual futures, which resemble standard futures contracts but do not expire, have become a staple in global crypto trading, with estimated annual volume reaching $90 trillion, according to Bank of America. The Commodity Futures Trading Commission's (CFTC) approval of Kalshi and Coinbase to list regulated perpetual futures in the US has sparked interest among trading firms, market makers, and newer clearing firms, but large financial institutions are taking a more cautious approach. Proprietary trading firms and market makers are more likely to be the first movers, as they have more freedom to test new venues and accept operational risk. Big banks, on the other hand, face stricter capital rules, client obligations, and reputational risk, making them more hesitant to commit to the new market.
The potential use cases for perpetual futures extend beyond speculation, as they could help traders manage weekend risk and provide a source of price discovery. However, the lack of depth in the market, thin weekend liquidity, and regulatory uncertainties are major concerns. A regulatory fight is also brewing, with questions surrounding the treatment of perpetual contracts as futures or swaps, and the impact on margin rules, registration duties, and liquidity provision. As the market continues to evolve, it remains to be seen whether Wall Street's cautious approach will give way to more widespread adoption of perpetual futures.