CME sues CFTC over Bitcoin perpetual futures approval
In brief
- CME files suit Thursday challenging CFTC approval of perpetual futures on U.S. exchanges
- Terry Duffy argues perpetual futures are swaps under Dodd-Frank, requiring different clearing rules
- CFTC approved Kalshi and Coinbase to offer Bitcoin perpetual contracts to U.S. traders
- Perpetual futures offer up to 50-to-1 leverage and never expire
- Duffy steps down as CME CEO in March 2027
The Legal Challenge
CME confirmed to Reuters that it would file the lawsuit Thursday. Duffy contends that perpetual futures are swaps under the Dodd-Frank Act, not futures. Classification as swaps would subject perpetual futures to different clearing, reporting, and trading-venue rules.
"Under the Dodd-Frank Act, it clearly defines what a swap is and what a future is, and when there's two parties exchanging payments to each other, that's deemed a swap," Duffy said on CNBC.
Duffy spent the past eight months preparing the legal challenge with CME's board. He will step down as CME CEO in March 2027, with Lynne Fitzpatrick, CME's President and CFO, becoming CME's first female CEO.
What Prompted the Dispute
The CFTC's recent approvals opened a door that CME says shouldn't exist. The CFTC approved prediction market Kalshi in late May to list a Bitcoin perpetual futures contract. The CFTC separately cleared crypto exchange Coinbase to connect U.S. customers to offshore perpetual futures.
This marked the first time perpetual futures products would reach American traders through domestic regulated exchanges. Perpetual futures are derivatives that never expire and rely on periodic funding payments between traders. They can carry leverage as high as 50-to-1.
The stakes matter. Offshore perpetual markets dwarf regulated venues, and bringing them onshore could reshape how American traders access leveraged crypto exposure.
The CFTC's Defense
CFTC Chair Michael Selig defended the regulator's decision as a way to bring one of crypto's most liquid markets onshore. The agency sees domestication as a win for transparency and investor protection.
Duffy's concerns extend beyond legal classification. He likened current conditions to the run-up to the 2008 financial crash, suggesting that unregulated leverage in crypto markets poses systemic risk. Whether courts agree is now the question.
