A federal judge said perpetual contracts tied to individual US stocks appear to be security-based swaps and left their trading approvals in place. The contracts track a stock’s price without giving traders shares or setting an expiration date. The absence of an expiration date could determine whether US exchanges can offer them to retail traders.
On Nov. 9, Coinbase, Kalshi and four other companies asked the court to accept a brief defending the Commodity Futures Trading Commission’s classification of the contracts as security futures. That classification places them under rules shared with the Securities and Exchange Commission. The Capital Markets Alliance Association, a trade group whose members include Cboe and Citadel Securities, argues that the contracts fall under the SEC’s tighter rules for security-based swaps. The six companies say the SEC has no exchange-traded retail framework for those swaps, which would shut off retail access.
Coinbase Derivatives, KalshiEX and Bitnomial Exchange applied on Sept. 18 to list perpetual contracts tied to individual large US stocks. The CFTC’s product review process deemed their applications approved on Nov. 2. The trade group sued that day to overturn the approvals.
In its complaint, the group argues that a contract without an expiration date cannot qualify as a security future. Judge Valerie Caproni’s early order found the group likely to succeed in arguing that the CFTC exceeded its authority. She denied a temporary restraining order because the group had not shown imminent, irreparable harm. Her assessment was preliminary, and the court has not ruled on the group’s separate request for a preliminary injunction.
Coinbase and Kalshi joined Kraken parent Payward, DRW Holdings, Jump Trading and Paradigm Operations in the proposed brief. The companies argue that federal law does not require a fixed expiration date for a security future. They cite standardized terms, margin requirements and centralized clearing as features familiar from traditional futures. Funding payments help keep a perpetual contract’s price tied to the stock it tracks.
Coinbase, Kalshi and Bitnomial face a decision on whether their approvals remain usable while the case proceeds. The trade group was scheduled to reply to the CFTC’s opposition to a preliminary injunction on Nov. 10.
