The concept of perpetual futures has become a cornerstone of the crypto financial landscape, but according to DRW CEO Don Wilson, much of the public's understanding of these products is misguided. In a series of posts, Wilson clarifies that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date. The characteristics commonly associated with crypto perpetuals, such as high leverage and around-the-clock trading, are not inherent to the contracts themselves but rather a result of how some crypto exchanges have chosen to implement them. Wilson emphasizes that the features often linked to perpetual futures, like auto-deleveraging and high leverage, are a product of the exchanges' design choices and not a fundamental aspect of the contracts.
His comments come at a time when there is a growing interest in introducing perpetual futures into regulated U.S. markets, with several exchanges exploring the launch of these products beyond the crypto space. Wilson suggests that regulators should focus on the economic substance of perpetual futures rather than their legal classification, arguing that they are economically equivalent to traditional futures contracts and should not be treated as swaps simply because they lack an expiration date.
He advocates for the broader adoption of perpetual futures across various markets, including commodities, securities, and crypto, seeing them as a valuable tool for price discovery and risk management.