A Cboe and Citadel Securities-backed coalition has sued the CFTC to block single-stock perpetual futures, asserting these products are regulated by the SEC.
According to Reuters, the Capital Markets Alliance launched legal action in New York federal court on November 3, coming just hours after the regulator greenlit the contracts for U.S. trading. The coalition seeks to overturn those decisions and block the CFTC from permitting the products to trade while litigation is pursued.
The lawsuit draws major Wall Street firms into an escalating battle over perpetual futures, which gained widespread popularity on cryptocurrency exchanges. Firms like Kalshi and Coinbase have actively sought to launch comparable offerings, though their efforts are constrained by strict U.S. regulatory oversight.
Cboe-Backed Coalition Files Challenge Against CFTC Approval
During its November 3 release, the Capital Markets Alliance contended that single-stock perpetual derivatives were misclassified by the CFTC as basic security futures.
The coalition contends that these contracts represent security-based swaps, placing them squarely under Securities and Exchange Commission authority. Its lawsuit claims administrative laws were breached when the CFTC approved the instruments without fully justifying its reasoning.
Additionally, the complaint asserts that regulators ignored key risks to investors and broke from past precedents on perpetual derivatives. The alliance asks the court to deem these instruments security-based swaps so their implementation is halted.
Organizations including Cboe, Citadel Securities, and Healthy Markets Association actively back the legal effort, while broader Wall Street participation is anticipated.
Cboe chief Craig Donohue warned that the regulator’s move undermined core safeguards in American securities trading. He insisted that stock-linked derivatives must stay tied to standard investor protections that were established by Congress.
“This issue, however, is about investor protection for securities trading and the rule of law,”
Donohue said in a company statement.
American Securities Association chief Chris Iacovella echoed those worries, accusing the CFTC of sidestepping SEC authority alongside congressional bans that were designed to block retail access to security-based swaps.
CFTC Stands Behind Its Approval of Perpetual Futures on U.S. Stocks
The lawsuit landed on the very day CFTC Chairman Michael Selig declared that qualified U.S. exchanges could start offering single-stock perpetual futures, expanding access as trading guidelines were unveiled.
Under the CFTC’s framework, exchanges must hold contract market status while maintaining SEC registration to list security futures. Consequently, these instruments operate under dual oversight, as both federal securities rules and commodity statutes are enforced.
In his official remarks, Selig noted that the clearance built directly upon the agency’s prior choice to allow Bitcoin perpetual futures, a decision that was finalized on a domestic exchange.
He maintained that introducing perpetual derivatives to regulated U.S. venues offers domestic traders access to financial tools that are utilized extensively across international markets.
The agency dismissed the lawsuit’s accusations, with a CFTC spokesperson calling the legal action a troubling disruption to regulated trading spaces where market stability is prized.
“Our markets should be governed by law, not litigation campaigns intended to block innovation,”
the spokesperson said.
The SEC declined to comment regarding the litigation, though agency officials underscored their commitment to introducing innovative financial instruments while robust investor protection standards are maintained.
Crypto Trading Platforms Challenge Traditional Wall Street Firms
Perpetual futures enable traders to speculate on asset prices without setting a mandatory expiration date. Unlike traditional contracts, these instruments eliminate the hassle of replacing expiring positions, though periodic funding rates are charged to maintain price alignment.
These instruments typically rely on funding payments to tie contract values closely to spot market prices. While high leverage amplifies potential returns, traders face expanded downside risks whenever market volatility is triggered.
The CFTC’s greenlight clears the way for platforms like Kalshi, Coinbase Derivatives, and Bitnomial, whose prior proposals for stock-tied perpetual contracts were submitted to regulators.
Kalshi’s proposed parameters establish a 15.50% customer margin floor along with a 23-hour weekday trading window. Meanwhile, Coinbase’s submissions outline cash-settled contracts linked to individual equities and exchange-traded funds as broader market access is structured.
The clash follows a separate lawsuit filed by CME Group in June challenging how regulators treat cryptocurrency perpetual futures. CME similarly questioned whether contracts lacking expiration dates truly qualify as standard futures, raising concerns as legal definitions are contested.
Rivalry continues building well past established derivatives venues. On Oct. 29, Intercontinental Exchange, owner of the New York Stock Exchange, partnered with Trade.xyz to build U.S.-regulated perpetual markets, leveraging Hyperliquid infrastructure as execution systems are integrated.
The companies plan to establish distinct trading and clearing operations covering equities, commodities, currencies, and cryptocurrencies. However, the proposed U.S. venue remains pending while necessary regulatory approvals are sought.
A subsequent review of the planned exchange outlined broker-driven access, identity checks, and robust anti-money laundering controls that were formulated to secure the platform.
Neither ICE nor Trade.xyz has set a formal rollout date. Their October agreement noted that both firms would pursue the regulatory clearances required to run the proposed market, including specific authorization before margin trading is permitted.
