The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, but this criticism is misdirected. The true source of risk lies not in the contracts, but in the design of the trading venue, including aspects such as leverage caps, margin rules, and default management. The risk of systemic events is not inherent to perpetual futures, but rather a result of how the venue is constructed.
Recent episodes of deleveraging in the crypto market, such as the October 2025 cascade, were caused by a combination of factors including macro shocks, stablecoin de-pegs, and exchange outages, but what turned these events into systemic crises was the liquidation cascade. This cascade is often triggered by venue choices, such as manipulable indices and auto-deleveraging mechanisms, rather than the perpetual futures themselves. The key to mitigating systemic risk is not to ban perpetual futures, but to ensure that trading venues are designed with robust risk management measures, including segregated funds, registered clearing entities, and regulatory oversight.
In fact, institutions are not looking to perpetual futures as a replacement for regulated futures, but rather as a tool for hedging delta exposure, and they are drawn to perpetuals because of their liquidity. The real question is not whether perpetuals belong in regulated markets, but how a given venue is built to handle defaults and contain risk. By implementing institutional-grade default management and regulated clearing standards, perpetuals can become a safe and useful tool for institutions, rather than a source of systemic risk.