According to Don Wilson, CEO of DRW, the general understanding of perpetual futures is misguided. In a series of posts, Wilson clarified that perpetual futures, or 'perps,' are essentially futures contracts without an expiration date.
The characteristics commonly associated with crypto perpetuals, such as high leverage and auto-deleveraging, are a result of how some crypto exchanges have chosen to implement these products, rather than inherent features of the contracts themselves. Wilson's comments come at a time when there is growing interest in introducing perpetual futures into regulated US markets. Several exchanges and market participants are exploring the launch of perpetual futures beyond crypto, but there are still questions about how these products should be regulated and whether they fit within existing frameworks. Wilson emphasized that the design choices of crypto exchanges, such as continuous operation and real-time margin calculation, should not be confused with the nature of perpetual futures.
Instead, he argued that digital payment systems can improve risk management by allowing for real-time settlement and reducing the need for large upfront margin requirements. Wilson believes that the true innovation of perpetual futures lies in their ability to eliminate the need for investors to repeatedly roll expiring contracts, thereby reducing transaction costs and market impact. He urged regulators to focus on the economic substance of perpetual futures rather than their legal labels, stating that they should be treated as futures, not swaps, and made available across a broader range of markets.