DRW CEO: Regulators Misunderstand Perpetual Futures as Gambling
In brief
- DRW CEO Don Wilson: perpetual futures are futures contracts without expiration, not gambling tools
- High leverage and auto-deleveraging reflect exchange implementation, not contract fundamentals
- Real-time settlement enables crypto exchanges to recalculate margin continuously, reducing collateral
- Regulators should evaluate perpetual futures on economic substance, not legal labels
- Regulated U.S. perpetual futures gaining interest; Kalshi proposing precious metals expansion
The Innovation Behind Perps
Most of what people think they know about 'perps' has nothing to do with the contract itself, Wilson wrote. The real innovation is simpler than the hype suggests: perpetual futures eliminate the need for investors to repeatedly roll expiring contracts, reducing transaction costs, market impact, and roll slippage. That's it. No exotic mechanics required.
Wilson also expressed opposition to auto-deleveraging, a feature that forcibly closes positions to protect the exchange. There's no reason it needs to be used for perps, he argued. Crypto exchanges chose to implement it; it's not inherent to the contract structure.
How Real-Time Settlement Changes the Game
The difference between crypto and traditional markets matters here. Crypto exchanges like Hyperliquid operate continuously, use digital collateral and can calculate margin requirements in real time. Traditional clearinghouses generally calculate margin once a day, with market participants often having until the following business day to post additional collateral.
With real-time settlement, exchanges can recalculate margin continuously and require traders to post collateral immediately. This reduces the need for large upfront margin requirements. It's a feature of the infrastructure, not the contract.
The Regulatory Debate
Wilson's core argument is straightforward: There's no reason to treat perpetuals as swaps simply because they don't expire. Economically, they're futures. Regulators should focus on economic substance rather than legal labels.
His comments arrive as interest in bringing perpetual futures into regulated U.S. markets continues to grow. Kalshi, which saw perps trading explode shortly after launching, recently submitted a proposal with regulators to expand its perpetual futures offerings to precious metals. Wilson is calling for perpetual futures to be available across a broader range of markets, including commodities, securities and crypto. The question for regulators is whether they'll evaluate the contracts on their merits or continue to conflate implementation with substance.
