For years, perpetual futures have been a staple in the crypto trading world, particularly among international investors. Now, as these contracts make their way into regulated US markets, Wall Street is grappling with whether they are a fleeting trend or a lasting disruptor to traditional futures. The initial numbers are hard to dismiss.

Kalshi's perpetual futures saw over $1 billion in trading volume within a week of launch in June, marking the company's most successful product debut since prediction markets. The exchange has since sought regulatory approval to offer perpetual futures tied to gold and silver, indicating that the product may expand beyond bitcoin and other digital assets. Perpetual futures, often referred to as 'perps,' are similar to standard futures contracts but lack an expiration date.

Traders are not required to close or roll over their positions into new contracts each month or quarter. Instead, periodic funding payments help maintain the contract's price in relation to the underlying asset. This product has become a core component of global crypto trading, with Bank of America estimating annual perpetual futures volume at approximately $90 trillion. On May 29, the Commodity Futures Trading Commission (CFTC) granted Kalshi permission to offer the contracts, and Coinbase also received approval to list regulated perpetual futures in the US.

However, within Wall Street, interest does not necessarily translate to immediate adoption. People familiar with the discussions stated that perps are being discussed more frequently, partly because US regulators are allowing offshore markets to move onshore. Nevertheless, most large financial institutions are still studying the products rather than preparing for major launches.

The first movers are likely to be proprietary trading firms, market makers, and newer clearing firms. Unlike large banks, prop shops trade with their own capital, giving them more freedom to test new venues, accept operational risk, and withdraw if the economics become unfavorable. Big banks, on the other hand, face stricter capital rules, client obligations, and reputational risk, making them more cautious.

The potential use cases for perps extend beyond speculation, as they could help traders manage weekend risk. Traditional futures markets close for part of the weekend, leaving traders exposed to unexpected events. A liquid 24-hour perpetual market could change this, allowing firms to adjust positions as events unfold and use weekend prices to estimate where CME futures may reopen.

Insiders said that perps could be useful as both a hedge and a source of price discovery. However, the problem lies in depth, as a contract may trade around the clock, but institutions may struggle to move large positions without shifting the market. Weekend liquidity remains thin, and collateral systems do not always move as quickly as the markets they support.

A regulatory battle is also emerging, with questions surrounding whether some perpetual contracts should be treated as futures or swaps, affecting margin rules, registration duties, and who can provide liquidity. The debate is becoming increasingly competitive, with CME challenging the CFTC's treatment of Kalshi's bitcoin perpetuals.

For now, Wall Street's view is cautious rather than hostile, with trading firms seeing a product they understand, regulators seeing a market moving onshore, and exchanges seeing a chance to capture new volume. However, the largest banks are unlikely to lead the charge, instead waiting for the rules, liquidity, and infrastructure to catch up.