Key facts
- Perpetual futures, a popular crypto trading product, are now entering regulated U.S. markets.
- Exchanges like Kalshi and Coinbase have received approval from the CFTC to offer these contracts.
- Perpetual futures allow for 24/7 trading, enabling continuous risk management outside traditional market hours.
- The product has seen significant trading volume, with Kalshi's debut exceeding $1 billion in its first week.
- Large financial institutions are proceeding cautiously due to compliance, clearing, and risk system costs.
- The distinction between futures and swaps for perpetual contracts is a key regulatory debate.
Perpetual futures, a trading product long favored in cryptocurrency markets, are now making their way into regulated U.S. exchanges, potentially altering traditional financial market dynamics. These contracts, which do not expire and use periodic funding payments to align with underlying asset prices, offer continuous 24/7 trading capabilities. This contrasts sharply with traditional futures markets that typically close on weekends, creating challenges for traders needing to manage risk during events that occur outside of market hours.
Kalshi, an exchange that previously focused on prediction markets, received regulatory approval from the Commodity Futures Trading Commission (CFTC) in May to offer perpetual futures. The product saw significant early success, surpassing $1 billion in trading volume within its first week. Kalshi is also seeking approval to extend these contracts to commodities like gold and silver, signaling a broader ambition beyond digital assets.
Coinbase has also secured approval to list regulated perpetual futures in the U.S. However, the adoption by larger Wall Street institutions is proceeding with caution. While the concept of 24/7 trading and risk management is being discussed more frequently, many major financial firms are still in the study phase, weighing the costs of compliance, clearing, and risk systems against the potential profits in a nascent market. Early movers are expected to be proprietary trading firms and market makers, which have more flexibility than large banks.
The regulatory landscape is also a point of contention, with ongoing debates about how perpetual contracts should be classified—as futures or swaps—which impacts margin rules and registration requirements. CME Group has publicly challenged the CFTC's classification of Kalshi's bitcoin perpetuals, suggesting that competitive interests may also be at play as exchanges seek to expand into new asset classes.