The CFTC says CME cannot have it both ways

The Commodity Futures Trading Commission (CFTC) has told a federal court that CME Group cannot show any financial harm from the agency's approval of perpetual futures, and so has no standing to sue. The argument is in a reply brief filed on Friday, 16 October, in the US District Court for the District of Columbia. A perpetual future is a leveraged derivative with no expiry date that tracks an asset's current price.

The case is over a CFTC order of 29 May that approved BTCPERP, a cash-settled bitcoin perpetual contract from the prediction-market operator Kalshi, CoinDesk reported, together with a policy statement that the agency will treat such products as futures, case by case. CME, the largest US futures exchange operator, sued on 18 June. It argues that perpetuals have no expiry or delivery obligation and involve funding payments between traders, so they are swaps rather than futures, and that the CFTC did not explain its break from enforcement cases that treated crypto perpetuals as swaps.

The brief's central line is that competition alone is not an injury. "Everyone agrees on at least this much: CME must plausibly allege an actual or imminent increase in competition. CME has not even done that," the CFTC wrote. "Allegations of increased competition, without any plausible inference of an imminent financial injury, therefore do not meet basic Article III standards." The agency says CME has conceded that any added competition is limited to its retail business, not its institutional clients.

Its sharpest argument uses CME's own words. In CME's second-quarter earnings script of 22 July, the brief says, its chief executive said the exchange has "the full technical and operational capabilities to launch perpetual futures" but has "not heard demand from our customers". "CME cannot have it one way with the Court and another way with the investing public on earnings calls," the CFTC wrote. CME did not immediately respond to a request for comment, CoinDesk reported on Monday.

The brief also sets out CME's own crypto volumes, from the exchange's monthly reports, to argue that perpetuals have done it no harm. On the CFTC's figures, CME's twelve crypto futures traded 3.28 million contracts in September, against 2.66 million in May, the month of the approval. The table also shows a dip in July, to 2.52 million, below the May level. Only one product, Chainlink futures, remained lower than in May, by 340 contracts.

This is the agency's second attempt to end the case early. It moved to dismiss on 2 September, calling the dispute "much ado about nothing", CoinDesk reported. CME filed its opposition on 2 October. The judge, Colleen Kollar-Kotelly, has refused the CFTC's request to withhold the administrative record until the dismissal motion is decided, and, according to the brief, also denied the agency's request for limited discovery on standing. The Hyperliquid Policy Center has filed a brief in the case, which the CFTC cites.

Not everyone thinks the agency is ahead. Jaret Seiberg, a policy analyst at TD Cowen, wrote in a Monday client note that CME may still have the edge on standing and on its argument that perpetuals are swaps, CoinDesk reported. "What increasingly concerns us is the growth in perps while the litigation is playing out," he wrote, adding that unwinding the market could become complicated if CME won.

The stakes reach beyond one contract: the policy covers perpetuals on other digital commodities, and exchanges have filed for perpetuals on individual stocks. Komposite has reported on those equity perpetual filings and on the CFTC's separate attempt to define event contracts as swaps.