SEC Joins CFTC to Defend Single-Stock Perpetual Futures Approval
TREE NEWS reports: The U.S. Securities and Exchange Commission (SEC) has formally sided with the Commodity Futures Trading Commission (CFTC) in a legal battle over single-stock perpetual futures, signaling a united regulatory front. The dispute centers on the CFTC’s November 2 approval of these novel contracts, which the Capital Markets Alliance (CMA)—backed by Cboe and Citadel Securities—is seeking to overturn.
In a recent court filing, the SEC argued that the CMA mischaracterizes the situation as one of “CFTC overreach and SEC absence.” The SEC noted that the exchanges’ rules for these contracts still require its own review and agreed with the CFTC that the CMA lacks standing to sue. However, the SEC has not definitively classified perpetual futures as futures or swaps, and it must decide by December 31 whether to disapprove the exchange rules.
The Legal Battle Over Contract Classification
The CMA contends that contracts without an expiration date cannot be considered “security futures” under joint CFTC-SEC oversight, but rather “security-based swaps” solely under SEC purview—which are harder to market to retail investors. On November 3, Judge Valerie Caproni denied the CMA’s emergency motion for lack of evidence of irreparable harm, but she also indicated the CMA is likely to succeed on the legal classification argument.
Coinbase, Kalshi, Kraken parent Payward, DRW, Jump, and Paradigm have filed a joint brief asserting that these contracts are security futures. Meanwhile, Better Markets and former SEC Commissioner Allison Herren Lee have sought to file in support of the CMA. No hearing date has been set, and Kalshi’s recently launched products will continue trading until Judge Lorna Schofield rules on the CMA’s injunction request.
Implications for Crypto Exchanges and U.S. Markets
The SEC’s support for the CFTC provides a temporary boost to crypto-native platforms like Kalshi, Coinbase, and Bitnomial, which have rushed to list perpetual futures tied to U.S. equities. These products offer round-the-clock trading and leverage, appealing to crypto traders but raising concerns among traditional market participants about volatility and investor protection.
The case underscores a broader jurisdictional tug-of-war between the SEC and CFTC over digital asset products. A ruling in favor of the CMA could force these contracts into the more restrictive security-based swap framework, potentially limiting access for retail investors. Conversely, a win for the regulators would validate the joint oversight approach and pave the way for more innovative derivatives.
What to Watch
All eyes are on the SEC’s December 31 deadline to rule on the exchange filings. A decision to allow the contracts would reinforce the CFTC’s authority and provide regulatory clarity for crypto exchanges expanding into traditional finance. If the SEC disapproves, it could trigger further legal challenges and delay the rollout of these products. Either way, the outcome will set a precedent for how perpetual futures—and potentially other novel derivatives—are regulated in the U.S.
