The approval of perpetual futures contracts in the US may expose traders to unforeseen tax and regulatory uncertainty if these products are ultimately deemed swaps rather than futures, a concern that has received minimal public attention, as stated by CME Group Chairman and CEO Terry Duffy. In an interview with CoinDesk, Duffy noted, 'There's a consequence that nobody's talking about.
There's ambiguity right there, from a tax perspective, for all US participants now.' The ambiguity stems from the periodic funding payments exchanged between long and short positions in perpetual contracts, which Duffy believes satisfy the statutory definition of a swap under US law. If perpetual contracts are classified as swaps, they will be taxed under 'ordinary' taxation, as opposed to the blended tax treatment available under Section 1256 of the US tax code for futures. However, the IRS has not provided specific guidance on the tax treatment of perpetual futures, leaving market participants uncertain about how to report these positions.
Legal experts emphasize that the issue is complex, with the definition of swaps being extremely broad and the economic function of perpetual futures differing from their structural appearance.