Coinbase, Kalshi, Kraken parent back CFTC in legal fight over stock perpetual futures

Coinbase, Kalshi and four other entities joined the CFTC in a lawsuit concerning the regulation of perpetual futures tied to individual US stocks. The legal team of Coinbase revealed on Monday that the coalition also includes Kraken parent Payward, DRW Holdings, Jump Trading and Paradigm Operations. The companies argue that stock perpetual futures are covered by existing US futures laws.

The legal action follows a federal judge's recent ruling that the CFTC may have "exceeded its statutory authority" in permitting single-stock perpetuals to trade as security futures. If resolved, the case could influence whether US exchanges offer retail traders contracts that track individual stocks without expiration. The CFTC announced the introduction of single-stock perpetual futures, or stock perps, on Nov.

3, enabling traders to speculate on the price movements of individual stocks without owning the shares. These contracts have no fixed expiration date, unlike traditional futures. The Capital Markets Alliance Association (CMAA), a trade and advocacy group representing financial market participants, filed a lawsuit against the CFTC last week, contesting the agency's authority to permit the contracts to trade.

The CMAA contends that the lack of a fixed expiration date for the contracts warrants their regulation as security-based swaps, primarily overseen by the Securities and Exchange Commission (SEC) with stricter restrictions on retail trading. The six companies supporting the CFTC assert that a fixed expiration date is not mandatory for a contract to be classified as a security future, which is subject to joint CFTC and SEC oversight.