Single stock perpetual futures started trading in the US last week after the CFTC let a 45 day review clock run out on applications from Kalshi, Coinbase and Bitnomial. Within a day the Capital Markets Alliance, a new group representing Cboe, Citadel Securities and the Healthy Markets Association, sued the CFTC in New York to halt them, arguing the contracts are swaps that belong under the SEC. A judge refused an emergency order but said the alliance would probably win on the law. Briefing on the injunction wrapped up this week, and the SEC joined in.
The SEC’s brief (below) is supportive, but it doesn’t weigh in on whether perps are futures or swaps. It backs the CFTC against an injunction and calls the alliance’s picture of “a CFTC gone rogue, and an SEC gone missing” mistaken. It outlined its own powers over the perpetual contracts and agrees with the CFTC that the alliance has no right to sue. One of those powers is to decide whether to overturn the Kalshi, Coinbase and Bitnomial exchange rules, and it has until December 31 to do so. It gave no hints about its decision.
The firms with the most to gain filed on the CFTC’s side. Coinbase, Kalshi and Payward, the Kraken parent that owns Bitnomial, are the three exchange operators with approved perpetual contracts. They filed a joint amicus brief with DRW, Jump Trading and Paradigm. At stake is the potential loss of revenue by Citadel Securities, which fills around 35% of US retail stock orders through its wholesale business, taking flow from brokers and executing it off exchange. Jump and DRW are proprietary trading firms that provide liquidity on exchanges in futures, options, stocks and crypto. If volumes move from equities to perps, they shift from products in which Citadel Securities currently specializes to venues where Jump and DRW already operate.
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