For years, perpetual futures have dominated the crypto landscape, particularly among international investors. As these contracts enter the regulated US market, Wall Street is grappling with whether they represent a fleeting retail fad or a lasting challenge to traditional futures. The initial numbers are undeniable, with Kalshi's perpetual futures reaching $1 billion in trading volume within a week of their June launch, marking the company's most successful product debut since prediction markets.
The exchange has since pursued regulatory approval to offer perpetual futures tied to gold and silver, indicating the product's potential to expand beyond bitcoin and other digital assets. Perpetual futures, or 'perps,' are akin to standard futures contracts but lack an expiration date, eliminating the need for traders to close or roll over positions monthly or quarterly. Instead, periodic funding payments help maintain the contract's price in line with the underlying asset.
This product has become a cornerstone of global crypto trading, with Bank of America estimating the annual volume of perpetual futures to be around $90 trillion. On May 29, the Commodity Futures Trading Commission (CFTC) granted Kalshi permission to offer these contracts, and Coinbase also received approval to list regulated perpetual futures in the US.
However, within Wall Street, interest does not translate to immediate adoption. Discussions about perps are becoming more frequent, partly due to US regulators allowing offshore markets to transition onshore.
Nonetheless, most large financial institutions are still in the process of studying these products rather than preparing for major launches. Proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers. Unlike large banks, these entities trade with their own capital, affording them the freedom to test new venues, accept operational risks, and withdraw if the economics become unfavorable. Big banks, on the other hand, face stricter capital rules, client obligations, and reputational risks, making the potential profit in a nascent market not yet sufficient to justify the costs of building compliance, clearing, and risk systems.
This distinction is significant because 'Wall Street' encompasses several groups moving at different paces. Individual traders and smaller firms often arrive first, followed by market makers once volume increases. Banks typically require years of data, clear regulatory treatment, and stable infrastructure before committing substantial sums.
The potential applications of perps extend beyond speculation; they could help traders manage weekend risk. Traditional futures markets are partially closed over the weekends, despite the fact that significant events like wars, elections, and policy decisions do not pause. A trader with options exposure on Friday may have to wait until Sunday night to hedge against a sharp move.
A liquid, 24-hour perpetual market could change this dynamic, allowing firms to adjust positions as events unfold and use weekend prices to estimate where CME futures may reopen, making perps useful for both hedging and price discovery. According to one industry insider, 'The demand has to be there, or the capital won't be,' suggesting firms won't commit to balance sheets until customer activity justifies it. The challenge lies in depth; a contract may trade continuously, but that doesn't mean institutions can move large positions without impacting the market.
Weekend liquidity remains thin, and collateral systems do not always move as swiftly as the markets they support. A regulatory battle is also taking shape, with a key question being whether some perpetual contracts should be treated as futures or swaps, affecting margin rules, registration duties, and who can provide liquidity.
Industry insiders believe these legal questions may become more critical as exchanges expand perps into commodities, equities, and other traditional markets. The debate is also becoming competitive, with CME challenging the CFTC's treatment of Kalshi's bitcoin perpetuals, arguing for different regulation. Similar disputes could emerge if exchanges seek to expand perpetuals into equities and other asset classes. One industry insider noted, 'A lot of this stuff...
is more commercial than people are going to admit to out loud,' implying some opposition reflects incumbent exchanges protecting existing businesses as much as concerns about market structure. For now, Wall Street's stance is cautious rather than hostile, with trading firms recognizing a familiar product, regulators seeing a market move onshore, and exchanges seeing an opportunity to capture new volume. However, the largest banks are unlikely to lead the charge, instead waiting for rules, liquidity, and infrastructure to mature.