The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, driven by high-leverage, retail-driven trading. However, this critique is misdirected, as the risk is inherent to the trading venue, not the contract. The actual risk factors include leverage limits, margin rules, index construction, and default handling. The recent crypto market deleveraging episodes, such as the October 2025 cascade, were caused by a combination of macro shocks, stablecoin de-pegs, exchange outages, oracle failures, over-leverage, and thin liquidity.
The liquidation cascade, which is typically triggered by forced liquidations, can be mitigated by venue design choices. The real question is not whether perpetuals belong in regulated markets, but how a given venue is built. Regulatory requirements, such as segregated funds, registered clearing entities, and supervisory oversight, are essential to securing the baseline. The way a venue handles defaults under stress is a separate choice, varying even within the regulated perimeter.
A more pressing concern is that institutions may not want perpetuals at all, as they are often seen as speculative rather than a replacement for regulated futures. However, institutions use perpetuals to hedge delta, not as a substitute for dated futures, but because of the liquidity they provide. The liquidity edge of perpetuals is structural, drawn in by retail traders, and can be safely utilized by institutions with proper default management. The debate surrounding perpetuals is misguided, and the focus should be on how venues handle defaults under stress.
Regulated clearing has established a standard for decades, which Bullish is building towards. By containing defaults at their source, rather than force-feeding them into a falling market, the chain of risk transmission can be broken, making perpetuals a viable infrastructure for institutions.