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 misdirected, as the risk is not inherent to the perpetual futures contract itself, but rather a result of the venue's design.
The true risk factors include leverage caps, margin rules, funding design, and default management, which are not inherent to a contract with no expiration date. Recent deleveraging episodes in the crypto market, such as the October 2025 cascade, were caused by a combination of factors, including macro shocks, stablecoin de-pegs, and exchange outages, rather than the perpetual futures contracts themselves. The key to preventing systemic risk is not to ban perpetual futures, but to ensure that the venue on which they are traded is designed with robust risk management measures, such as segregated funds, a registered clearing entity, and a supervisor's oversight.
Furthermore, institutions are not looking to use perpetual futures as a replacement for regulated futures, but rather as a tool for hedging delta, and the liquidity provided by perpetual futures is a valuable asset for risk management. The real question is not whether perpetual futures belong in regulated markets, but how the venue is built to handle defaults and contain risk. By implementing institutional-grade default management and regulated clearing, perpetual futures can become a safe and valuable tool for institutions, rather than a source of systemic risk.