A group backed by Cboe and Citadel Securities has sued the Commodity Futures Trading Commission over its approval of perpetual futures linked to individual US stocks. The Capital Markets Alliance, which also includes Healthy Markets Association, filed the lawsuit on November 3.
The alliance filed its case in the US District Court for the Southern District of New York. It wants the court to overturn approvals involving Coinbase Derivatives, KalshiEX, and Bitnomial Exchange and stop the contracts from trading during the case.
The group argues that the contracts qualify as security-based swaps rather than security futures. These products fall under the Securities and Exchange Commission’s exclusive authority, according to the alliance.
The complaint also accuses the CFTC of violating the Administrative Procedure Act. The alliance says the regulator failed to explain its decision or properly examine the risks to investors and securities markets.
In addition, the group questions why the CFTC departed from its previous approach to perpetual derivatives without explaining the change.
The alliance wants the court to declare the contracts security-based swaps and overturn the approvals. It also seeks an injunction preventing the CFTC from allowing similar contracts through alternative approval procedures during the case.
Adam Ford, secretary of the alliance, warned that the CFTC’s approach could weaken investor protection. He said rushing new financial products into the market could undermine confidence in the US financial system.
Cboe CEO Craig Donohue said the CFTC should respect the rules Congress created to protect investors trading securities. American Securities Association CEO Chris Iacovella accused the regulator of bypassing SEC oversight and congressional restrictions on retail access to security-based swaps.
CFTC Defends Its Classification of Stock Perpetual Futures
The lawsuit came hours after the CFTC cleared eligible US exchanges to offer single-stock perpetual futures under Commission Regulation 40.3. Chairman Michael Selig said the contracts qualified as security futures under the Commodity Futures Modernization Act of 2000.
This classification brings the contracts under both CFTC and SEC oversight. Exchanges must also meet CFTC requirements and register with the SEC before offering security futures.
The alliance disputes that classification because the contracts have no expiry dates or requirements for future delivery of the underlying shares. It argues that these features make them security-based swaps rather than futures.
Unlike conventional futures, perpetual contracts allow traders to maintain positions without an expiry date. Traders can speculate on stock prices without purchasing the underlying shares.
The contracts use recurring funding payments between long and short traders to keep their prices close to the underlying stocks. They also allow traders to use leverage, which can magnify both gains and losses.
Selig defended the decision by pointing to the popularity of perpetual futures on offshore platforms. He argued that US exchanges should offer these products under domestic regulation.
Lawsuit Adds to Disputes Over the Markets
The Capital Markets Alliance’s lawsuit adds to growing disagreements over how US regulators should oversee perpetual futures. The outcome could affect other companies seeking to introduce similar products through regulated American exchanges.
CME Group has already challenged the CFTC’s treatment of cryptocurrency perpetual futures involving Kalshi and Coinbase. The exchange filed a separate lawsuit in June over the regulator’s approach to those products.
Meanwhile, Intercontinental Exchange is also exploring opportunities in the perpetual market. On October 29, the company partnered with Trade.xyz to develop a US-regulated perpetual futures platform using Hyperliquid infrastructure.
The proposed platform will cover equities, commodities, currencies, and cryptocurrencies. However, ICE and Trade.xyz still need regulatory approval before launching the market.
