Futures or Swaps? Wall Street Takes CFTC to Court Over Stock Perpetuals

• A Cboe and Citadel Securities-backed group sued the CFTC on November 3.
• The suit claims single-stock perpetual futures are security-based swaps under SEC authority.
• The CFTC approved the contracts for U.S. trading the same day.
• The CFTC called the lawsuit “troubling” interference with regulated markets.
• Kalshi, Coinbase Derivatives and Bitnomial have filed plans for stock-linked perpetuals.

A legal fight over which regulator should oversee a new type of stock derivative has reached federal court. The Capital Markets Alliance, a group backed by Cboe and Citadel Securities, sued the Commodity Futures Trading Commission (CFTC) in New York on November 3, according to Reuters.

The suit came hours after the CFTC cleared single-stock perpetual futures for U.S. trading. The group wants a court to overturn the approvals and block the products from trading while the case moves forward.

At the center of the case is one question: are these contracts futures or swaps? The answer decides whether the CFTC or the Securities and Exchange Commission (SEC) has authority over them.

The Case for SEC Oversight

The alliance argues the CFTC wrongly classified the products as security futures. It says they are security-based swaps, which fall under the SEC’s authority.

The complaint claims the CFTC broke the Administrative Procedure Act by approving the products without properly explaining its decision. It also says the regulator did not weigh investor risks and departed from its past treatment of perpetual derivatives.

The group asks the court to declare the contracts security-based swaps. Cboe, Citadel Securities and the Healthy Markets Association are among the backers of the challenge.

Cboe CEO Craig Donohue said securities-linked derivatives should stay under the investor protections Congress created. “This issue, however, is about investor protection for securities trading and the rule of law,” he said in a company statement.

American Securities Association CEO Chris Iacovella shared those concerns. He said the CFTC “sidestepped the SEC’s jurisdiction and Congress’ ban” on offering security-based swaps to retail investors.

CFTC Stands by Its Approval

CFTC Chairman Michael Selig announced the approval the same day the lawsuit was filed. 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. This means the products fall under both securities laws and commodity rules.

Selig said the move followed the regulator’s earlier decision to permit Bitcoin perpetual futures on a domestic exchange. He said it would give U.S. traders access to products already widely used overseas.

A CFTC spokesperson called the lawsuit “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 case. It did say it supports new financial products that come with full oversight and investor protections.

Perpetual futures have no expiration date, so traders do not need to roll positions into new contracts. They use funding payments to keep prices close to the underlying asset, and leverage can raise both gains and losses.

Kalshi, Coinbase Derivatives and Bitnomial had already submitted proposals for stock-linked perpetual contracts. Kalshi’s proposed rules include a 15.50% customer margin floor and trading 23 hours a day on weekdays.

Coinbase’s filings cover cash-settled contracts tied to individual stocks and exchange-traded funds. In June, CME Group filed a separate lawsuit over the CFTC’s treatment of crypto perpetual futures, also questioning whether contracts without expiration dates count as futures.

On October 29, Intercontinental Exchange, owner of the New York Stock Exchange, announced a partnership with Trade.xyz to build U.S.-regulated perpetual markets using Hyperliquid infrastructure. The plan covers equities, commodities, currencies and crypto, with broker-based access, identity checks and anti-money laundering controls.

The proposed platform still needs regulatory approval, including permission for leveraged trading. Intercontinental Exchange and Trade.xyz have not announced a launch date.