For years, perpetual futures have been a staple in the crypto trading world, particularly among international investors. Now, with their introduction to regulated American markets, Wall Street is grappling with whether they are a fleeting trend or a lasting challenge to traditional futures.
The initial numbers are compelling, with Kalshi's perpetual futures reaching $1 billion in trading volume within a week of launch. The exchange has since sought regulatory approval to offer perpetual futures tied to gold and silver, indicating that the product may expand beyond bitcoin and other digital assets. Perpetual futures, also known as 'perps,' are similar to standard futures contracts but lack an expiration date. Traders are not required to close or roll over their positions, as periodic funding payments help maintain the contract's price in relation to the underlying asset.
This product has become a core component of global crypto trading, with Bank of America estimating annual perpetual futures volume at approximately $90 trillion. On May 29, the Commodity Futures Trading Commission (CFTC) cleared Kalshi to offer these contracts, and Coinbase also received approval to list regulated perpetual futures in the US. However, within Wall Street, interest does not necessarily translate to immediate adoption. People familiar with the discussions noted that perps are being mentioned more frequently, partly due to US regulators allowing offshore markets to move onshore.
Nevertheless, most large financial institutions are still studying 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, prop shops trade with their own capital, giving them the freedom to test new venues, accept operational risk, and withdraw if the economics become unfavorable. Big banks, on the other hand, face stricter capital rules, client obligations, and reputational risk, making the potential profit in a young market not yet justifiable for the cost of building compliance, clearing, and risk systems.
The difference in approach matters, as the term 'Wall Street' encompasses several groups moving at different speeds. Individual traders and smaller firms often arrive first, followed by market makers once volume grows, and banks typically require years of data, clear regulatory treatment, and stable infrastructure before committing large sums.
The potential applications of perps extend beyond speculation, as 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. A liquid 24-hour perpetual market could change this, allowing firms to adjust positions as events unfold and use weekend prices to estimate where CME futures may reopen. Insiders noted that perps could be useful as both a hedge and a source of price discovery.
One industry insider stated, 'The demand has to be there, or the capital won't be,' arguing that firms won't commit balance sheet until customer activity justifies it. The issue is depth, as a contract may trade around the clock, but that does not mean institutions can move large positions without shifting 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 taking shape, with one 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 said these legal questions may become more important 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 that the contracts should be regulated differently. Similar disputes could emerge if exchanges seek to expand perpetuals into equities and other asset classes. One industry insider noted, 'A lot of this stuff... is more commercial than people are going to admit to out loud,' suggesting that 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, with trading firms seeing a product they understand, regulators seeing a market moving onshore, and exchanges seeing a chance to capture new volume. However, the largest banks are unlikely to lead, instead waiting for the rules, liquidity, and infrastructure to catch up.