The introduction of perpetual futures into regulated markets has sparked concerns about systemic risk, with critics warning that these high-leverage instruments could 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 venue's choices, such as leverage caps, margin rules, and default management, are the primary factors that 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, which is often triggered by forced liquidations, can lead to a systemic event. However, this is not a feature of perpetual futures, but rather a result of the venue's design. The real question is not whether perpetuals belong in regulated markets, but how the venue is built.
Regulatory requirements, such as segregated funds and a registered clearing entity, are necessary to secure the baseline. The way a venue handles a default under stress is a separate choice, and it varies even within the regulated perimeter. A more significant objection to perpetuals is that institutions may not want them at all. A recent JPMorgan note found limited institutional appetite for perpetuals, treating them as speculative rather than a replacement for regulated futures.
This is correct in terms of the mechanics, as perpetuals fall short as a substitute for dated futures. However, institutions are not using perpetuals as a replacement for dated futures, but rather to hedge delta.
Many of the institutions trading options on the Bullish Exchange use perpetuals to hedge delta, not as a stand-in for dated futures, but because that is where the liquidity is. Term structure is less relevant to delta hedging than liquidity, and many of crypto's dated futures are thinly traded, while perpetuals are the deepest, most continuously tradable delta-one instruments available. The liquidity edge is structural, and retail gravitates to perpetuals for what they are: no expiry, no roll, continuously tradable. The design that draws that flow concentrates liquidity in perpetuals, which is the overlooked prize in bringing perpetuals onshore.
The two halves of the debate are one: the liquidity institutions want already exists, drawn in large part by retail, and what lets them use it safely is institutional-grade default management, the same thing that contains the systemic risk the critics fear. The question was never 'are perpetuals dangerous?' but 'when the market is under stress, how does a venue handle a default?' Regulated clearing has established the standard for decades, which is also the standard Bullish is building toward, having filed with the CFTC to operate as a regulated contract market and clearinghouse. When a liquidation's shortfall outruns the insurance fund, the backstop is to socialize losses: auto-deleveraging force-closes offsetting profitable positions at an off-market price in order to absorb the defaulter's loss. The clearing model works differently, starting with the defaulter, whose own margin and fund contribution absorb the first loss.
The position is worked off through the order book or, if large, auctioned to other clearing members. Behind that sits a pre-funded guaranty fund sized to regulated clearinghouse standards, with broad loss-sharing only beyond that, and rarely. None of this completely eliminates risk, but it breaks the chain that turns one blown-out account into a market-wide cascade: a default absorbed at its source, not force-fed into a falling market. That is the difference between a venue that contains a failure and one that transmits it, and the transmission is the systemic risk the critics fear.
Meet that standard and perpetuals become infrastructure institutions can use; miss it and we have the hazard critics describe, regulated or not. Perpetuals were never the whole story; the design is.