The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, with critics arguing that these high-leverage instruments will import instability into the market. However, this critique is misplaced, as the risk is not inherent to the perpetual futures contract itself, but rather a result of the venue's design.
The venue's choices, such as leverage caps, margin rules, and default management, are what determine the level of risk. 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 risk transmission mechanism, which is often the result of venue choices such as manipulable indexes and auto-deleveraging. The real question is not whether perpetual futures belong in regulated markets, but rather how a given venue is designed to handle risk.
Regulatory requirements, such as segregated funds and a registered clearing entity, are necessary to secure the baseline, but the way a venue handles a default under stress is a separate choice that varies even within regulated markets. A more valid concern is that institutions may not want perpetual futures at all, as they may not be suitable as a replacement for regulated futures due to their lack of term structure and basis risk. However, institutions are not using perpetual futures as a replacement for dated futures, but rather as a tool to hedge delta, and the liquidity of perpetual futures is a key factor in this decision.
The design of perpetual futures, which draws in retail flow and concentrates liquidity, is what makes them attractive to institutions. The overlooked prize in bringing perpetual futures onshore is the creation of a deep, durable pool of liquidity in the instruments that hedging desks want. The debate over perpetual futures is not about whether they are dangerous, but rather about how a venue handles a default when the market is under stress.
Regulated clearing has established a standard for decades, which is also the standard that Bullish is building towards. By containing the risk of default at its source, rather than transmitting it to the market, a venue can break the chain that turns one blown-out account into a market-wide cascade.
This is the difference between a venue that contains a failure and one that transmits it, and it is the transmission that is the systemic risk that critics fear.