For years, perpetual futures have dominated the crypto trading scene, particularly among global investors outside the US. Now, with their regulated debut in American markets, Wall Street is grappling with whether these contracts are a fleeting retail trend or a lasting disruptor to traditional futures. Initial numbers are compelling, with Kalshi's perpetual futures reaching $1 billion in trading volume within a week of launch in June.
This milestone has prompted the exchange to seek regulatory approval for gold and silver perpetual futures, signaling potential expansion beyond digital assets. Perpetual futures, or 'perps,' differ from standard futures contracts in that they lack an expiration date, eliminating the need for traders to close or roll over positions.
Instead, periodic funding payments maintain the contract's price alignment with the underlying asset. As a cornerstone of global crypto trading, Bank of America estimates the annual volume of perpetual futures to be around $90 trillion. Following the Commodity Futures Trading Commission's (CFTC) approval of Kalshi and Coinbase to list regulated perpetual futures in the US, interest in these contracts is growing within Wall Street. However, large financial institutions are proceeding with caution, choosing to study the products rather than launch them immediately.
Proprietary trading firms, market makers, and newer clearing firms are more likely to be the first movers, given their greater freedom to test new venues and accept operational risks. The hesitance of big banks stems from stricter capital rules, client obligations, and reputational risks, which may not be justified by the potential profits in a nascent market. The phrase 'Wall Street' encompasses various groups moving at different speeds, with individual traders and smaller firms typically at the forefront, followed by market makers once volume increases, and banks requiring years of data, clear regulations, and stable infrastructure before committing. Beyond speculation, perpetual futures could offer traders a means to manage weekend risk, as traditional futures markets are closed during part of the weekend.
A liquid 24-hour perpetual market could enable firms to adjust positions in real-time and use weekend prices to estimate the reopening prices of CME futures, making perps valuable for both hedging and price discovery. Industry insiders emphasize that demand must be present to justify committing capital, but the current issue is depth, with contracts trading around the clock not necessarily meaning institutions can move large positions without impacting the market. Regulatory debates are also emerging, particularly regarding the classification of perpetual contracts as futures or swaps, which affects margin rules and registration duties. The competitive aspect of these debates suggests some opposition may be driven by incumbent exchanges protecting their existing businesses.
Currently, Wall Street's stance is cautious rather than hostile, with trading firms recognizing a familiar product, regulators observing a market moving onshore, and exchanges seeing an opportunity to capture new volume. However, the largest banks are unlikely to take the lead, instead waiting for the rules, liquidity, and infrastructure to mature.