The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, driven by high-leverage and retail involvement. However, this criticism is misdirected, as the true source of risk lies in the design of the trading venue, including factors such as leverage caps, margin rules, and default management. The risk is not inherent to the perpetual futures contract itself, but rather a result of the choices made by the venue.

The recent deleveraging episodes in the crypto market, including the October 2025 cascade, were caused by a combination of macro shocks, stablecoin de-pegs, exchange outages, oracle failures, over-leverage, and thin liquidity. The liquidation cascade, which is often the result of forced liquidations and shared reference pricing, can turn a sell-off into a systemic event.

However, this is not a feature of perpetual futures, but rather a result of venue design. The real question is not whether perpetuals belong in regulated markets, but how a given venue is built to handle risk. Regulatory requirements, such as segregated funds, registered clearing entities, and supervisory oversight, are necessary to establish a baseline level of security. The way a venue handles defaults under stress is a separate choice, and it varies even within regulated markets.

A sharper objection to perpetuals is that institutions may not want them at all, as they are often seen as speculative instruments rather than a replacement for regulated futures. However, this objection is based on a misunderstanding of how institutions use perpetuals.

Many institutions use perpetuals to hedge delta, not as a replacement for dated futures, but because they offer liquidity and flexibility. The liquidity edge of perpetuals is structural, drawn in by retail investors who are attracted to the no-expiry and continuously tradable nature of the contracts.

This liquidity is a prize that can be harnessed by institutions, but only if they are able to use it safely. The key to safe use is institutional-grade default management, which is the same thing that contains systemic risk. The question is not whether perpetuals are dangerous, but how a venue handles defaults 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 defaults at their source, rather than transmitting them to the broader market, venues 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 key to making perpetuals a safe and useful tool for institutions.