The U.S. Commodity Futures Trading Commission (CFTC) has approved trading in perpetual futures based on individual stocks. This marks the first time that such products—which have no expiration date and allow leverage—have come under U.S. regulatory jurisdiction, signaling that 24-hour leveraged investment products, previously confined to crypto assets, are expanding into the traditional stock market.
CFTC Chairman Michael Selick said on the 3rd (local time) that the contracts would be classified as security futures and permitted to trade. The products will trade on designated contract markets that are dually registered with the Securities and Exchange Commission (SEC) and will be subject to joint supervision by the two agencies. The CFTC's move follows its approval of Bitcoin perpetual futures earlier this year, broadening the permitted scope to stocks.
Unlike conventional stock derivatives, perpetual futures have no fixed expiration date and allow positions to be held after regular trading hours end. Demand for such products has been demonstrated on overseas crypto platforms, but high volatility and retail investor protection concerns have been consistently raised. Chairman Selick said the measure would provide U.S. investors with new tools for risk management and price discovery.
Immediately after the approval, backlash erupted from the established exchange industry. The Capital Markets Alliance, whose members include the Chicago Board Options Exchange (Cboe) and Citadel Securities, filed suit in the U.S. District Court for the Southern District of New York seeking to halt trading, arguing that the CFTC failed to comply with the Administrative Procedure Act. Cboe CEO Craig Donohue expressed concern that stock-related derivatives were being traded on CFTC-jurisdiction platforms outside appropriate securities regulation and investor protection safeguards. CME Group had already filed a separate lawsuit arguing that perpetual futures should be classified as swaps rather than futures.
By contrast, new entrants aiming to enter the market welcomed the decision. Prediction-market platform Kalshi applied in September to list perpetual futures on individual stocks, and Coinbase and Bitnomial are also preparing to launch related products. Andy Ross, Kalshi's head of institutional business, criticized the incumbents for filing suit in an effort to block greater competition.
Debate over the supervisory framework is also continuing in political circles. Republican Senator Katie Britt called for joint supervision by the SEC and CFTC, while Democratic Senator Elizabeth Warren warned that the products are vulnerable to insider trading and could increase market volatility. "These risky financial products are prone to insider trading, put American investors at risk, and could inject serious volatility into our markets," Warren said.
The decision has two main ramifications. One is the regulatory jurisdiction dispute. As the long-standing boundary between the SEC and CFTC over securities derivatives is called into question again, the product launch timeline itself could be shaken depending on the court's ruling. The other is market structure. If 24-hour leveraged stock exposure enters legal U.S. platforms, there is talk that overnight and weekend trading demand could erode liquidity at traditional exchanges. The incumbents' decision to pursue litigation is not unrelated to this threat to market share.
Regulators say the joint supervisory framework will fill gaps in investor protection, but with congressional demands for stronger oversight converging with industry lawsuits, the controversy is expected to continue for the time being.
