A group backed by Cboe and Citadel Securities has sued the CFTC to block single-stock perpetual futures, arguing that the products fall under SEC jurisdiction.
Summary
- Cboe and Citadel Securities-backed Capital Markets Alliance has sued the CFTC over single-stock perpetual futures approvals.
- The lawsuit argues that single-stock perpetual contracts qualify as security-based swaps under SEC jurisdiction.
- The CFTC maintains that registered exchanges can offer the contracts under existing federal derivatives rules.
- The legal challenge comes as cryptocurrency trading platforms seek access to traditional U.S. equity derivatives markets.
Reuters reported that the Capital Markets Alliance filed the lawsuit in New York federal court on November 3, hours after the regulator cleared the contracts for U.S. trading. The group wants the court to overturn the approvals and prevent the CFTC from allowing the products to trade while litigation continues.
The lawsuit brings established Wall Street firms into a growing dispute over perpetual futures, which have become popular on cryptocurrency trading platforms. Companies including Kalshi and Coinbase have been pursuing similar products in the regulated U.S. market.
Cboe-backed group challenges CFTC approval
In its November 3 announcement, the Capital Markets Alliance argued that the CFTC had incorrectly classified single-stock perpetual derivatives as security futures.
The group maintains that the contracts are security-based swaps, which fall under the Securities and Exchange Commission’s authority. Its complaint alleges that the CFTC violated the Administrative Procedure Act by approving the products without adequately explaining its decision.
Moreover, the lawsuit further claims that the regulator failed to consider investor risks and departed from its previous treatment of perpetual derivatives. The alliance wants the court to declare the contracts security-based swaps and prevent the approvals from taking effect.
Cboe, Citadel Securities and Healthy Markets Association are among the organizations supporting the legal challenge.
Cboe CEO Craig Donohue said the regulator’s actions threatened the rules governing American securities markets. He argued that securities-linked derivatives should remain subject to the investor protections 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 CEO Chris Iacovella expressed similar concerns. He accused the CFTC of having “sidestepped the SEC’s jurisdiction and Congress’ ban” on offering security-based swaps to retail investors.
CFTC defends stock perpetual futures approval
The legal challenge arrived on the same day CFTC Chairman Michael Selig announced that eligible U.S. exchanges could begin offering perpetual futures tied to individual stocks.
As crypto.news previously reported on the approval, the contracts were deemed approved under Commission Regulation 40.3 and the Commodity Futures Modernization Act of 2000.
Under the CFTC’s framework, exchanges must be designated contract markets and registered with the SEC to trade security futures. The products consequently fall under both federal securities laws and commodity regulations.
In his official statement, Selig said the approval followed the regulator’s earlier decision to permit Bitcoin perpetual futures on a domestic exchange.
He argued that bringing perpetual derivatives into regulated U.S. markets would give traders access to products already widely used overseas.
The regulator rejected the lawsuit’s criticism. A CFTC spokesperson described the legal challenge as “troubling” interference with regulated markets.
“Our markets should be governed by law, not litigation campaigns intended to block innovation,” the spokesperson said.
The SEC declined to comment on the litigation but expressed support for introducing new financial products under comprehensive oversight and investor protection requirements.
Wall Street firms face competition from crypto trading venues
Perpetual futures allow traders to speculate on asset prices without a fixed expiration date. Unlike conventional futures, the contracts do not require traders to replace expiring positions with new ones.
The products commonly use funding payments to keep contract prices close to their underlying assets. Leverage can increase potential profits but exposes traders to larger losses.
The CFTC’s decision has opened a path for platforms including Kalshi, Coinbase Derivatives and Bitnomial, which previously submitted proposals for stock-linked perpetual contracts.
Kalshi’s proposed rules include a 15.50% customer margin floor and trading across 23 hours on weekdays. Coinbase’s filings cover cash-settled contracts tied to individual stocks and exchange-traded funds.
The dispute follows a separate lawsuit filed by CME Group in June challenging the regulator’s treatment of cryptocurrency perpetual futures. CME similarly questioned whether contracts without expiration dates should qualify as futures.
Competition has been developing beyond existing derivatives exchanges. On October 29, New York Stock Exchange owner Intercontinental Exchange announced a partnership with Trade.xyz to develop U.S.-regulated perpetual markets using Hyperliquid infrastructure.
The companies plan to establish separate trading and clearing operations covering equities, commodities, currencies and cryptocurrencies. The proposed U.S. platform still requires regulatory approvals.
A subsequent review of the proposed market detailed plans for broker-based access, identity verification and anti-money laundering controls.
ICE and Trade.xyz have not announced a launch date. Their October agreement said the companies would seek the regulatory approvals necessary to operate the proposed market, including permission for leveraged trading.
