CME and CFTC Clash Over On-Chain Perpetual Futures

The Commodity Futures Trading Commission's decision to allow crypto perpetual futures has ignited a battle with the CME Group, the largest derivatives exchange operator in the US. The CME has filed a lawsuit against the CFTC, arguing that the regulator is misapplying the law by permitting products that do not have an expiration date, which is a key characteristic of traditional futures contracts. The CME claims that these perpetual futures, also known as perps, are harmful to its business and that the CFTC's sudden embrace of them did not consider the potential consequences. The dispute has significant implications for the US approach to the rapidly growing market for perpetual futures, with non-US perps volume reportedly reaching $60 trillion in volume last year. The CME's lawsuit argues that the CFTC is mislabeling perps as futures, which would subject them to different regulatory and tax regimes. The CFTC, on the other hand, has determined that a case-by-case review process is suitable for perps, and has approved the listing of perps products on platforms such as Kalshi and Coinbase. The feud between the CME and the CFTC has sparked frustration among proponents of the CFTC's reform agenda, who view the CME's actions as an attempt to stifle innovation and maintain its dominance in the market. The outcome of the lawsuit is uncertain, but it is likely to have a significant impact on the future of perpetual futures in the US.