The U.S. Commodity Futures Trading Commission said in a new court filing that CME has not shown the kind of imminent financial harm needed to establish standing in its challenge to the agency’s policy on perpetual contracts. According to the filing, CME has pointed to increased competition but did not reasonably explain why that competition creates an immediate financial injury. The CFTC also said CME’s crypto futures volumes have actually risen since the policy shift.
The dispute centers on how Kalshi’s bitcoin perpetual contract should be regulated. The CFTC approved Kalshi’s first bitcoin perpetual in May and said products of this kind would be reviewed case by case under the futures framework. CME argues that perpetuals have no expiration date and should be treated as swaps, not futures, which would place them under a different regulatory regime. In the same filing, the CFTC said CME had previously told investors it had not heard customer demand for perpetuals and that such products would not replace its existing futures, undercutting the exchange’s position in court. TD Cowen policy analyst Jaret Seiberg said CME may still have the stronger arguments on standing and on classifying the product as a swap, though he warned that unwinding the market could become more difficult if it keeps growing during the litigation.
The U.S. Commodity Futures Trading Commission said in a new court filing that CME has not adequately shown imminent financial harm and therefore lacks standing to challenge the agency’s policy on perpetual contracts.
In the filing, the CFTC said CME has claimed that competition is increasing, but has not reasonably explained why that amounts to an immediate financial injury. The regulator also said CME’s crypto futures trading volumes have in fact increased since the policy change.
The case turns on how perpetual contracts should be classified
The CFTC approved Kalshi’s first bitcoin perpetual contract in May and said products of this type would be regulated as futures on a case-by-case basis.
CME has argued that perpetual contracts do not expire and should be classified as swaps rather than futures, which would place them under a different regulatory framework.
The CFTC asked a federal judge last month to dismiss the case. Its latest filing expands on its argument that CME does not have standing to sue.
CFTC points to CME’s prior comments to investors
The agency also said CME had told investors it had not heard customer demand for perpetual contracts and that such products could not replace its existing futures offerings. On that basis, the CFTC argued that CME should not be taking one position in court and another on earnings calls.
Analyst says CME may still have an edge on part of the case
TD Cowen policy analyst Jaret Seiberg said CME may still have the stronger arguments on standing and on whether the product should be classified as a swap. He also said that if the perpetuals market keeps expanding while the litigation is pending, dismantling that market could become more complicated if CME ultimately wins.
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