The U.S. Commodity Futures Trading Commission has asked a federal court to throw out CME Group’s legal challenge to the derivatives regulator’s approval of cryptocurrency perpetual futures on grounds that the exchange failed to meet the legal prerequisites to bring the case.
The motion, filed Sept. 2 in the U.S. District Court for the District of Columbia, came in response to CME’s June 18 complaint over the CFTC’s approval of KalshiEX’s BTCPERP contract on May 29. The BTCPERP contract, based on Bitcoin’s spot price, is authorized for trading as a futures contract on the CFTC-registered designated contract market Kalshi.
CME argues that crypto perpetuals should be considered swaps under both the Commodity Exchange Act and the Dodd-Frank Act and is seeking vacatur of both the Kalshi approval and a CFTC policy statement allowing designated contract markets to list similar digital-asset perpetuals as futures.
The CFTC did not ask the court to adjudicate the legal classification dispute. Instead, it argued to dismiss the case on the basis that CME could not show that it would be harmed by competition. The CFTC argued that, even if both CME and Kalshi operate designated contract markets, CME is allowed to submit contracts for approval to trade perpetual futures under the same framework as Kalshi.
The CFTC has argued that CME’s competitive disadvantage is self-imposed, noting that CME trading data shows Bitcoin and Ether future volumes in June and August were higher than the amount traded in May, the month the Kalshi contract was approved. The CFTC further argued that these numbers show that CME’s claim of lost competition is contradicted by its own data.
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The CFTC also disputed that a ruling in favor of CME would resolve the injury that it alleged, arguing that even if the perpetual contracts were swaps, other venues would have been able to offer such products in the same regulatory environment, so reclassifying the product would not resolve the competitive costs identified by CME.
The key issue in this gap is the treatment of perpetual contracts, which provide for continuing exposure to the terms of an agreement without a maturity date. CME would like to see these contracts treated as swaps under the statute.
However, the CFTC has indicated that no fixed expiration date is necessary for futures contracts to be considered futures under federal commodities law.
Finally, on May 29, Kalshi’s BTCPERP was approved by the regulator, following a review of its application under Regulation 40.3, under the Commodity Exchange Act, Commodity Futures Trading Commission rules and core principles for designated contract markets, although the CFTC has cautioned that perpetual structures are not necessarily appropriate for all asset types.
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The CME’s opposition to the motion to dismiss is due October 2. The CFTC has requested oral argument. The court has yet to schedule an oral argument.
If the case is dismissed based on standing or other procedural reasons, the current policy and the Kalshi approval would be left in place, though the question of crypto perpetuals being futures or swaps would remain unanswered.
