The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, with critics arguing that these high-leverage instruments will destabilize the market. However, this criticism is misplaced, as the risk is not inherent to the contract itself, but rather a result of the venue's design. The true risk lies in the venue's choices, such as leverage caps, margin rules, and default management. The recent deleveraging episodes in the crypto market, including the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages.
The liquidation cascade that ensued was not a result of the perpetual futures contract, but rather the venue's design, which allowed for manipulable indexes and auto-deleveraging. The real question is not whether perpetuals belong in regulated markets, but how a given venue is built. Regulatory requirements, such as segregated funds and a registered clearing entity, are necessary to secure the baseline. However, the way a venue handles a default under stress is a separate choice, and it varies even within the regulated perimeter.
A more valid concern is that institutions may not want perpetuals at all, as they are not a replacement for regulated futures. However, institutions are using perpetuals to hedge delta, not as a substitute for dated futures, but because that is where the liquidity is. The liquidity edge of perpetuals is structural, drawn in by retail flow, and is the overlooked prize in bringing perpetuals onshore. The debate surrounding perpetuals is not about their inherent risk, but about how a venue handles a default.
Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards. By containing the systemic risk through institutional-grade default management, perpetuals can become a safe and useful tool for institutions.