The approval of perpetual futures contracts in the US may expose traders to unforeseen tax and regulatory uncertainty if these products are ultimately deemed to be swaps rather than futures, a concern highlighted by CME Group Chairman and CEO Terry Duffy. In an interview with CoinDesk, Duffy noted that there is ambiguity surrounding the tax perspective for all US participants due to the lack of clarity on whether perpetual futures should be treated as swaps or futures.
This ambiguity stems from the periodic funding payments exchanged between long and short positions in perpetual contracts, which Duffy argues satisfies the statutory definition of a swap under US law. The mismatched designation could lead to institutional traders receiving a blended tax treatment under Section 1256 of the US tax code if perpetual contracts are considered futures, whereas they would be taxed under ordinary taxation if classified as swaps.
However, the IRS has not provided specific guidance on the tax treatment of perpetual futures, leaving market participants uncertain about how to report these positions. Legal experts, including Rustin Diehl and Jason Gottlieb, emphasize that the issue is complex and that the definition of swaps is broad, allowing for considerable room for interpretation. The outcome of the court decision and potential litigation may significantly influence how the US approaches perpetual futures, with Duffy warning that large institutions could face uncertainty over how to report trades involving these contracts.