Cboe and Citadel-backed group sues the CFTC to block single-stock perpetual futures, raising fresh questions over US market regulation.

Table of contents
  • Cboe and Citadel-backed group challenges CFTC over single-stock perps
  • Lawsuit claims the regulator has overstepped its authority
  • CFTC defends innovation, while the SEC stresses investor protection

US financial watchdog Commodity Futures Trading Commission (CFTC), is facing a fresh lawsuit from an industry group backed by financial giants Cboe and Citadel Securities. With this legal opposition, the group is trying to block the agency’s move to allow perpetual futures contracts linked to individual company stocks.

Cboe and Citadel take CFTC to court

According to a Reuters report, industry group Capital Markets Alliance, backed by Cboe and Citadel Securities, has filed a lawsuit against the CFTC. The move intends to stop the US regulator from allowing trading in perpetual futures linked to individual company stocks.

It is worth noting that the lawsuit was filed on the same day the CFTC announced its decision about perpetual futures trading. As per the announcement, properly registered commodity markets could begin offering single-stock perpetual futures. This allows prediction market platforms to enter traditional financial markets, competing with established Wall Street giants.

Significantly, the lawsuit claims that the CFTC has overstepped its authority by allowing these products to enter the market. The Capital Markets Alliance stated the agency’s decision is against laws passed by Congress. The case also argues that the move could create a separate market for products linked to the US stocks, operating outside the SEC’s exclusive regulatory authority.

Why perpetual futures expansion is facing more legal challenges

Notably, this is not the first time the CFTC has faced a lawsuit over perpetual futures. In June, the regulator faced a legal challenge from the Chicago Mercantile Exchange (CME). The move came in response to the agency’s decision to allow Kalshi and Coinbase to offer perpetual futures linked to crypto.

Prediction market platforms like Kalshi and Polymarket have been looking to expand beyond their event-based trading. These platforms have been allowing users to trade on the possible outcomes of certain real-life events like sports and elections. But as they grow, they look beyond these areas and intend to expand into perpetual futures trading. As the CFTC makes this legal, these platforms could enter into the market directly challenging traditional financial firms like Cboe and Citadel Securities.

How did CFTC and SEC respond?

In response to the lawsuit, the CFTC stated that it is an attempt to interfere with markets regulated by the agency. A spokesperson noted, “Our markets should be governed by law, not litigation campaigns intended to block innovation."

Further, the CFTC defended the role of innovation in financial markets. The agency believes that a lawsuit should not be a weapon against regulatory innovations.

Meanwhile, the SEC supported the CFTC’s efforts to bring new financial products to the US market. The regulator added that such products should operate under strict regulatory oversight and investor protection measures. This, according to the SEC, allows room for innovation and competition.

Nynu V Jamal is a Crypto Journalist at CoinCodex with a background in English Literature and a strong interest in blockchain technology, cryptocurrencies, and digital finance. Holding a Master's degree in English Literature and having qualified for the UGC NET, she combines analytical research with clear, engaging writing to make complex crypto topics accessible to a broad audience. When she's not writing about crypto, she enjoys reading, singing, and exploring creative storytelling.