It is highly unusual for the largest derivatives exchange operator in the US, CME Group, to be at war with its regulator, the Commodity Futures Trading Commission (CFTC) – but it is now happening in a situation caused by the agency’s decision to allow blockchain-based perpetual futures products.
Last month, CME sued the CFTC and its chairman, Mike Selig, challenging its decision to allow prediction market platform Kalshi and cryptocurrency exchange Coinbase (COIN) to list crypto perps, decentralized derivatives contracts that allow users to speculate on the price of an asset with leverage and no expiration date.
Now, both sides await a federal lawsuit that could have a significant impact on how the United States approaches the fast-growing arena, where the volume of non-US perpetrators reportedly grew to $60 trillion in volume last year.
CME claims that the agency mislabels the products and therefore abuses the law. Futures need an end date, and the products, known as perps, are designed to allow traders to take a financial position on an asset’s future without any deadlines. The lawsuit alleges that these perpetrators are harmful to its long-outdated futures products and claims that the CFTC’s sudden embrace of them did not consider the consequences.
Rising tensions between the two entities rose around the start of the Iran conflict, which saw a surge in interest in perpetual contracts for oil prices traded 24/7 on off-shore decentralized finance (DeFi) exchanges such as Hyperliquid, as well as blockchain prediction markets that hosted trades tied to the oil markets.
Those on the side of the CFTC’s reform agenda in this highly politicized schism are voicing frustration, if not outrage.
“It’s incredibly unusual to see the largest exchange in America attack its own regulator, where the regulator is basically saying that anyone registered, including CME, can offer these types of products, and CME is saying that no one should be allowed to offer them,” Jake Chervinsky, CEO of the Hyperliquid Policy Center (HPC), said in an interview.
HPC is a Washington, DC-based non-profit focused on creating compatible DeFi in the US, heavily focused on perps and on-chain financial infrastructure, and supported by a $28 million initiative from the Hyper Foundation.
Not long after CME filed suit, that dispute took another turn when the exchange made a bid to speed up 24/7 trading of crude oil futures, but was blocked by the CFTC. CME Group’s attempted 24/7 West Texas Intermediate (WTI) crude oil contract is a traditional expiring futures product rather than a crypto-style perpetual swap. CME had cited investors’ desire to manage their positions “as the news breaks.”
Representatives for the CFTC declined to comment. At the time, CFTC Chairman Mike Selig said on X that “CME’s decision to disregard the Commission’s efforts to conduct a reasoned analysis of the critical issues at stake is wholly inappropriate.”
CME, which played a significant role in getting bitcoin futures listed and was instrumental in getting crypto accepted and adopted in the US, has a profound influence on commodities that the exchange has been successful in Washington DC over the years, thanks in large part to its outspoken chairman, Terry Duffy.
“The definition of a swap is pretty clear,” he said in an interview with CoinDesk. “When two parties exchange payments to each other, it’s considered a swap,” he said. “When you trade swaps contracts, it comes with obligations to maintain a five-day margin and register with the CFTC as a swaps market participant.”
As such, the CFTC did not follow protocol, which is effectively the law of the land, Duffy argued, adding a complaint that the CFTC may not be prepared to properly enforce its new perps policy, such as blocking non-US traders from trading on Kalshi or other CFTC-regulated platforms. “What are you doing to monitor American participants from participating in anything that is illegal for them to do?” Duffy asked.
“I haven’t seen a response to that yet, yet they are withholding my 24/7 self-certification contract,” he said.
Duffy had tangled with opponents in the digital asset space before, once debating then-FTX chief Sam Bankman-Fried about the industry’s efforts to cut out middlemen months before Bankman-Fried’s business collapsed and he was jailed on a fraud-related conviction.
During CME’s recent Q2 earnings call, Duffy addressed the growing market presence of perpetual futures and said institutional clients are not using perpetuals for hedging. He said CME has “the full technical and operational capabilities to launch perpetual futures” but “has not heard demand from our customers for these products.” Duffy went on to describe competitors’ perp markets as “an incubator system that I’m not paying for.”
When it comes to the way futures contracts work on traditional commodities, the structure differs from crypto, according to Liz Davis, partner and co-chair of financial services at law firm Davis Wright Tremaine.
“These perpetual contracts that started in the crypto space are a different type of product than, say, hog bellies or crude oil,” Davis said in an interview. “There’s an underlying tension with these new types of products being offered on traditional commodities. Here you have delivery issues and it’s really not traded 24/7 because you have monthly contracts that you roll from month to month.”
Davis said there’s a lot to consider in a market where the commodities the perps are tied to can be limited to trading only five days a week and set to only change hands within certain hours, as opposed to being always on.
“You just have to think through the different issues in terms of marginal liquidity and weekend custody; staffing and resources; your monitoring now has to move to weekends and holidays, etc.,” she said.
Duffy’s stance on crypto-perps is seen by crypto-natives and DeFi enthusiasts as typical of the way large incumbents deal with innovation that could threaten their dominance.
“It’s really going to come down to this kind of political battle between this massive incumbent and the regulator trying to allow challengers to the incumbent, allowing competition that the incumbent doesn’t want to see happen,” HPC’s Chervinsky said, adding:
“The problem with CME is not whether they are pro or anti-crypto. It is an incumbent who uses regulation to keep out competition and they are willing to take opposing positions depending on the timing to try to beat back the competition.”
So the future of CFTC-run perpetrators remains in a bubble while CME prepares its case, which includes allegations that the agency rubber-stamped the Kalshi application, which had been submitted a day before approval.
“The CFTC approved perpetrators despite a history of claiming they are swaps and without issuing a regulation despite seeking public comment in April 2025,” noted Jaret Seiberg, financial policy analyst at TD Cowen, arguing that CME may have the “upper hand” in this legal dispute. “This distinction is important as the regulatory and tax regimes for swaps and futures are different.”
Although the CFTC is intended to be a five-member commission, Chairman Selig currently serves as its sole member, making him the agency’s lone voice. And he wanted the regulator to clear a path for US perpetrators in the crypto space, sign off on a Kalshi product and approve customer activity at Coinbase.
“It’s interesting that this is being done with a one-man commission,” Davis said. “When you have a five-person commission, rulemaking doesn’t move as quickly because of the counterview. So you’re kind of deprived of that counterview, other than CME filing suit and their comments.”
Representatives for Kalshi and Coinbase declined to comment on the regulatory situation.
For now, Selig’s agency is opening that U.S. market through a policy statement — not a new rulemaking that gives interested parties a chance to comment and try to steer the outcome. It’s much the same crypto approach as its sister agency, the Securities and Exchange Commission, which has issued a wide variety of new policy statements without yet pursuing formal and durable regulations.
The CFTC determined that a case-by-case review process was appropriate for perpetrators. As a result, Kalshi’s debut offering surfaced last month, and the company said it reached more than $1 billion in trading volume in less than a week.
