The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk due to their potential for high-leverage trading. However, this criticism is misplaced, as the risk is inherent to the trading venue's design, not the contract. The venue's choices, such as leverage caps, margin rules, and default management, dictate the level of risk.

The recent episodes of deleveraging 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. The liquidation cascade, which can turn a sell-off into a systemic event, is driven by venue choices, such as manipulable indexes and auto-deleveraging.

These features are not inherent to perpetual futures. The real question is not whether perpetuals belong in regulated markets, but how a given venue is designed. Regulatory requirements, such as segregated funds and oversight, are necessary to secure the baseline.

However, the way a venue handles defaults under stress is a separate choice, and it varies even within regulated markets. A more valid concern is that institutions may not want perpetuals at all, as they are speculative and lack term structure.

However, institutions are using perpetuals to hedge delta, not as a replacement for dated futures, but because of their liquidity. The liquidity edge of perpetuals is structural, drawn in by retail investors, and what allows institutions to use it safely is institutional-grade default management. The debate surrounding perpetuals is not about their inherent danger, but about how venues handle defaults under stress. Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards.

By containing defaults at their source, rather than transmitting them to the market, venues can break the chain that turns a blown-out account into a market-wide cascade. This is the difference between a venue that contains a failure and one that transmits it, and it is the transmission that poses systemic risk.