The popularity of perpetual futures in the crypto space has been evident for years, particularly among investors outside the US. Now, with these contracts being introduced to regulated American markets, Wall Street is grappling with whether they represent a fleeting retail trend or a lasting challenge to traditional futures. Initial numbers have been striking, with Kalshi's perpetual futures reaching $1 billion in trading volume within a week of 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 at approximately $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 have become more frequent, partly because US regulators are allowing markets that once operated offshore to move onshore. Nonetheless, most large financial institutions are still assessing the 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 entities 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 face stricter capital rules, client obligations, and reputational risks. For them, the potential profit in a young market may not yet justify the cost of developing compliance, clearing, and risk systems. The difference in approach is significant 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 guidelines, 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 close for part of the weekend, 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 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 resources until customer activity justifies it.
The challenge lies in 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 emerging, 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 critical 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 the contracts should be regulated differently. Similar disputes could arise if exchanges seek to expand perpetuals into equities and other asset classes. 'A lot of this stuff...
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 an opportunity to capture new volume. However, the largest banks are unlikely to lead the charge; they will wait for the rules, liquidity, and infrastructure to mature.