In a lawsuit over perpetual crypto contracts in the U.S., the CFTC argued that derivatives giant CME has not shown concrete harm, while an analyst warned that the rapidly growing market could be difficult to roll back even if CME wins.
According to CoinDesk, the U.S. Commodity Futures Trading Commission (CFTC) argued in a court filing Friday that CME Group has not demonstrated the legal standing required to bring the lawsuit. The agency says that claiming competition could increase does not, by itself, establish imminent and concrete financial harm.
At the center of the dispute are perpetual futures contracts, commonly used in crypto markets. These products allow investors to take positions on price movements, often using leverage, and have no predetermined expiration date.
Why are CME and the CFTC at odds?
In May, the CFTC approved Kalshi’s first Bitcoin perpetual contract, opening the way for this market to develop in the U.S. The agency plans to regulate these products under the futures framework, evaluating each contract individually.
CME argues that these contracts, which have no expiration date, should be classified as swaps rather than futures. The distinction matters because it will determine which regulatory rules apply to the products in the U.S.
Last month, the CFTC asked the court to dismiss the lawsuit. In its latest filing, the agency argued that CME is telling the court that it will be harmed by competition while giving investors a different message. According to the agency, CME told investors in meetings that it had seen no signs of demand for perpetual products and that they were not alternatives to its own contracts. The CFTC also pointed to an increase in CME’s crypto futures trading volume since the policy change.
What could change in the market if CME wins?
In a note to clients on Monday, TD Cowen analyst Jaret Seiberg said CME could still have the advantage both in its claim that it has the right to bring the lawsuit and in its argument that the products should be classified as swaps.
But the analyst’s main focus was on timing: The perpetual market continues to grow while the lawsuit proceeds. Seiberg said that if this growth continues, reversing the market that has taken shape could become more complicated if CME wins.
As a result, the lawsuit’s significance is not limited to which side prevails; it also hinges on how large a market in the U.S. will need to adapt to the new legal framework by the time a decision is made.
Not investment advice.