For years, perpetual futures have been a staple in the crypto trading world, particularly among investors outside the US. Now, as these contracts enter the regulated American market, Wall Street is weighing 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 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 the product may extend 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 monthly or quarterly; instead, periodic funding payments help maintain the contract's price in line with the underlying asset. This product has become integral to 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) gave Kalshi the green light 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 because US regulators are allowing markets that once operated offshore to move onshore.
Nonetheless, most large financial institutions are still in the process of studying these 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, these firms trade with their own capital, giving them the freedom to test new venues, accept operational risks, and withdraw if the economics cease to be favorable. Big banks, on the other hand, face stricter capital rules, client obligations, and reputational risks, making the potential profit in a young market possibly not worth the cost of building compliance, clearing, and risk systems around it.
This distinction is important because 'Wall Street' encompasses several groups moving at different speeds. 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 significant sums. The potential use cases for perps extend beyond speculation; they could help traders manage weekend risk.
Traditional futures markets close for part of the weekend, despite the fact that significant events like wars, elections, and policy decisions do not. A trader with options exposure on Friday may have to wait until Sunday night to hedge a sharp move. A liquid 24-hour perpetual market could change this scenario, allowing firms to adjust positions as events unfold and use weekend prices to estimate where CME futures may reopen. Insiders suggest that perps could be useful both as a hedge and a source of price discovery.
'The demand has to be there, or the capital won't be,' one industry insider noted, arguing that firms won't commit balance sheet funds until customer activity justifies it. The issue, however, is depth.
A contract may trade around the clock, but that does not mean institutions can move large positions without impacting 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 taking shape, with a key question being whether some perpetual contracts should be treated as futures or swaps. This distinction affects margin rules, registration duties, and who can provide liquidity. Industry insiders believe these legal questions may become more significant as exchanges push 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 they should be regulated differently.
Similar disputes could emerge if exchanges seek to expand perpetuals into equities and other asset classes. 'A lot of this...
is more commercial than people are going to admit to out loud,' another industry insider said, suggesting some opposition reflects incumbent exchanges protecting existing businesses as much as concerns about market structure. For now, Wall Street's view is cautious rather than hostile. Trading firms see a product they understand, regulators see a market moving onshore, and exchanges see 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 mature.