Why the Question Over How to Regulate Perps Has Turned Into a Fight
Friday, 4 September 2026 · 2 min read · Listen to the episode ↗
In this episode, the ongoing regulatory battle over how to classify perpetual contracts takes center stage, highlighting tensions between the SEC and CFTC. The CME's lawsuit against the CFTC underscores the complexities of defining these contracts, with experts divided on whether they should be classified as futures or swaps. As smart contract technology reshapes financial products, the episode explores the implications of these classifications for market access and the future of decentralized finance in the U.S.
The SEC has released a document focused on disclosures for crypto offerings that resemble investment contracts, highlighting ongoing regulatory discussions in the crypto sector. The CME is suing the CFTC over the approval of perpetual contracts for Kalshi, indicating a significant conflict regarding regulatory classifications.
Jake Shchervinsky argues for classifying perpetual contracts as futures to improve user access in the U.S. In contrast, Tiffany Smith believes these contracts exhibit characteristics of both swaps and futures, with futures being the more suitable classification. Kathy Yoon points out that smart contract technology is enabling more accessible financial products, moving away from traditional bilateral contracts.
The CFTC has authorized trading of perpetual futures, classifying them as futures for centralized exchanges. However, confusion persists in the market due to past CFTC enforcement actions that categorized these contracts as swaps. The classification of perpetual contracts is critical, as it dictates who can access these financial instruments in the U.S.
The CME disagrees with the CFTC's authorization, suggesting a short-sighted perspective on new technology and products. The differing regulatory frameworks of the SEC and CFTC for futures and swaps complicate the classification of derivatives. Historical disagreements between the CFTC and SEC on asset classification further complicate the regulatory landscape.
Real-world asset perpetuals are gaining popularity, surpassing volumes of crypto perpetuals. There is optimism that harmonization efforts between the CFTC and SEC will streamline compliance and regulation. However, the current regulatory framework may not sufficiently address the risks associated with new software applications, and the CFTC's approach does not currently accommodate decentralized finance (DeFi).
Regulators are employing a cautious "crawl, walk, run" strategy to integrate on-chain markets into the U.S. financial system. Predictions suggest that perpetual futures will likely be offered under the CFTC's regulatory framework. There is a recognized need for tailored regulations for perpetual futures, akin to the SEC's guidance on crypto offerings.
This summary was generated from the episode transcript and can contain mistakes.