The introduction of perpetual futures to regulated markets has sparked concerns about systemic risk, with critics warning that these high-leverage instruments could destabilize the market. However, this critique is misplaced, as the risk is not inherent to the perpetual futures contract itself, but rather a result of the venue's design. The true risk lies in the venue's choices, such as leverage caps, margin rules, and default management. 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.

The liquidation cascade that ensued was exacerbated by venue choices, such as manipulable indexes and auto-deleveraging. These features are not inherent to perpetual futures, but rather a result of poor venue design.

The real question is not whether perpetuals belong in regulated markets, but how a given venue is built. Regulatory requirements, such as segregated funds and registered clearing entities, are necessary to secure the baseline.

However, the way a venue handles defaults under stress is a separate choice that varies even within regulated markets. A more valid concern is that institutions may not want perpetuals at all. A recent JPMorgan note found limited institutional appetite for perpetuals, treating them as speculative rather than a replacement for regulated futures. This is correct in terms of mechanics, as perpetuals fall short as a substitute for dated futures due to their variable funding and basis risk.

However, institutions are not using perpetuals as a replacement for dated futures, but rather as a tool for hedging delta. Many institutions trading options on the Bullish Exchange use perpetuals to hedge their directional exposure to the underlying price, not as a stand-in for dated futures, but because that is where the liquidity is. Term structure is less relevant to delta hedging than liquidity, and perpetuals offer the deepest and most continuously tradable delta-one instruments available. The liquidity edge of perpetuals is structural, drawn in by retail investors who prefer the no-expiry and continuously tradable nature of these contracts.

This liquidity is the overlooked prize in bringing perpetuals onshore, providing a deep and durable pool of liquidity for hedging desks. The two halves of the debate are one: the liquidity institutions want already exists, drawn in large part by retail, and what lets them use it safely is institutional-grade default management. The question was never whether perpetuals are dangerous, but how a venue handles defaults under stress.

Regulated clearing has established a standard for decades, which is also the standard Bullish is building towards. When a liquidation's shortfall outruns the insurance fund, the backstop is to socialize losses through auto-deleveraging. In contrast, the clearing model starts with the defaulter, whose own margin and fund contribution absorb the first loss. The position is worked off through the order book or auctioned to other clearing members, with a pre-funded guaranty fund sized to regulated clearinghouse standards.

This approach breaks the chain that turns one blown-out account into a market-wide cascade, containing the failure at its source rather than transmitting it. By meeting this standard, perpetuals can become infrastructure that institutions can use safely.