Regulatory Battle Over US Stock Perpetual Contracts: SEC Signals Support for CFTC, Counters Litigation from Traditional Exchange Alliances

Author: David Christopher, Bankless

Compiled by TechFlow

TechFlow Summary: The U.S. Securities and Exchange Commission (SEC) has officially endorsed the Commodity Futures Trading Commission (CFTC), joining forces to address the lawsuit filed by the Capital Markets Alliance (CMA), backed by Cboe and Citadel Securities. The alliance had previously sought to overturn the CFTC's November 2 approval of single-stock perpetual futures.

As the two regulators team up to defend the approval, the single-stock perpetual contracts launched by Kalshi, Coinbase, and Bitnomial have gained stronger regulatory backing in the short term. However, the presiding judge has previously expressed doubts about the legal classification of perpetual contracts, and the SEC must issue a final ruling on the exchange rules by December 31.

With both major U.S. financial regulators now stepping forward to defend the approval, the single-stock perpetual contracts from Kalshi, Coinbase, and Bitnomial appear more secure, though judges have previously raised questions about them.

The SEC has publicly supported the CFTC, uniting against the Capital Markets Alliance (CMA). Backed by Cboe and Citadel Securities, the alliance is filing a lawsuit to reverse the CFTC's November 2 decision approving single-stock perpetual futures.

Key Developments

· Regulatory Briefing: According to The Block, the SEC stated that the alliance's characterization of the situation as "an out-of-control CFTC and an absent SEC" is incorrect.

The SEC noted that the rules formulated by the relevant exchanges for these contracts still require review under the SEC's own procedures, and it agreed with the CFTC's position that the alliance lacks standing to sue.

Notably, the SEC has not explicitly defined whether perpetual contracts qualify as futures or swaps, and it must decide by December 31 whether to overturn these exchange rules.

· Core Dispute: The alliance argues that perpetual contracts cannot be classified as "security futures," which are jointly regulated by the CFTC and SEC, but rather as "security-based swaps," which fall solely under SEC jurisdiction and are more difficult to market to retail investors.

Judge Valerie Caproni dismissed the alliance's emergency motion on November 3 due to a lack of evidence showing actual harm, while simultaneously acknowledging that the alliance has a strong chance of prevailing on the legal classification argument.

· Party Positions: Coinbase, Kalshi, Kraken parent company Payward, DRW, Jump, and Paradigm have filed a joint amicus brief arguing that these contracts qualify as security futures.

Meanwhile, Better Markets and former SEC Commissioner Allison Herren Lee are seeking leave to file amicus curiae statements in support of the alliance. A hearing date has not yet been determined.

Until Judge Lorna Schofield, who is presiding over the case, rules on the alliance's injunction request, the product launched by Kalshi last week will continue to trade normally.