The popularity of perpetual futures in the crypto space has been undeniable, with trading volumes reaching $90 trillion annually, according to Bank of America. Now, with the Commodity Futures Trading Commission (CFTC) clearing the way for regulated perpetual futures in the US, Wall Street is grappling with whether this product is a fleeting trend or a lasting threat to traditional futures.

The early adopters, such as Kalshi and Coinbase, have already seen significant trading volumes, with Kalshi's perpetual futures reaching $1 billion in trading volume within a week of launch. Perpetual futures, also known as 'perps,' differ from standard futures contracts in that they do not expire, eliminating the need for traders to close or roll over positions. Instead, periodic funding payments keep the contract's price aligned with the underlying asset.

This product has become a staple in global crypto trading, but its adoption on Wall Street is expected to be more measured. Unlike large banks, proprietary trading firms and market makers are more likely to be the first movers, as they have more flexibility to test new markets and accept operational risks.

Big banks, on the other hand, face stricter capital rules, client obligations, and reputational risks, making them more cautious in their approach. The potential use cases for perpetual futures extend beyond speculation, as they could help traders manage weekend risk and provide a source of price discovery.

However, the lack of depth in the market and regulatory uncertainties may hinder their adoption. A liquid 24-hour perpetual market could revolutionize the way traders manage risk, but institutions will need to see significant customer demand before committing large sums. The regulatory landscape is also evolving, with debates surrounding the treatment of perpetual contracts as futures or swaps, and the potential for disputes between exchanges and regulatory bodies.

As the market continues to develop, it is likely that the largest banks will wait for the rules, liquidity, and infrastructure to catch up before making significant investments.