Judge Lets Stock Perpetual Futures Keep Trading but Says CFTC Likely Overstepped Its Authority

Stock perpetual futures can keep trading on Kalshi, Coinbase Derivatives and Bitnomial for now after a federal judge denied an emergency bid to halt them Tuesday, while finding that the Wall Street-backed challengers are likely to prove the CFTC overstepped its authority.

U.S. District Judge Valerie Caproni denied the temporary restraining order on Nov. 3 after a teleconference with the parties, hours after the CFTC said the products could begin trading on U.S.-regulated exchanges.

The plaintiff is the Capital Markets Alliance Association, a New York nonprofit whose members include Cboe Global Markets, Citadel Securities and the Healthy Markets Association, according to a declaration from its secretary, Adam Ford.

The group sued the CFTC and Chairman Michael S. Selig in the Southern District of New York, case No. 1:26-cv-09608, seeking to undo the approvals of filings by all three exchanges.

Caproni wrote that the group “is likely to succeed on the merits” of its claim that the agency lacks statutory authority to allow perpetual derivatives on individual stocks to be offered to retail investors on CFTC-regulated platforms.

“Because the perpetual contracts, by definition, do not provide for a ‘sale for future delivery of a single security,’ they cannot be a security future over which the CFTC has statutory and regulatory authority,” she wrote.

Instead, she said, the contracts “appear to satisfy the definition of a swap,” which falls to the Securities and Exchange Commission.

She also found that the balance of equities and the public interest favor the alliance, writing that the agency’s actions “seem to represent a major disruption to the equities market.”

The request failed on one prong. Caproni said the declarations from Cboe, Citadel Securities and Healthy Markets were “conjectural” about the harm members would suffer and did not show irreparable harm that was “actual and imminent.”

What the ruling does and does not do

The order leaves the approvals in place. It does not decide the case or the alliance’s separate motion for a preliminary injunction.

The CFTC’s opposition is due Friday, Nov. 6, and the alliance’s reply is due Tuesday, Nov. 10. The order says that schedule is subject to change by the assigned judge. The docket lists Judge Lorna G. Schofield as assigned to the case.

Kalshi was already listing four single-stock perps on Qualcomm, McDonald’s, Amgen and Costco by Wednesday morning, with maximum leverage of 4.9 times.

Bloomberg Law reported that the judge signaled she might ultimately side with the Wall Street firms opposed to the products.

A CFTC-SEC turf fight with crypto venues in the middle

The fight is over a label. Selig’s Nov. 3 statement said the contracts were deemed approved under Commission Regulation 40.3 as security futures products, a category the CFTC and SEC oversee jointly. The exchanges filed them Sept. 18, and the agency let its 45-day review period lapse without a written order.

The alliance argues that a contract with no expiration date and no delivery obligation is a security-based swap. Congress limited retail trading in those to national securities exchanges under full SEC oversight.

Its complaint says the CFTC “invited a parallel, synthetic market in U.S. stocks to grow outside the exclusive jurisdiction” of the SEC.

A CFTC spokesperson called the lawsuit “troubling” and told Reuters: “Our markets should be governed by law, not litigation campaigns intended to block innovation.”

For crypto-native venues, the stakes reach past stocks. Perpetuals are the core product of crypto derivatives trading, and Kalshi and Coinbase have used the CFTC’s framework to bring them onshore.

The agency approved the first U.S.-listed bitcoin perpetual on May 29, and Kalshi went live with the product soon after.

That approval already faces a challenge. CME Group sued the CFTC in June, arguing that a contract built on exchanged funding payments is a swap, not a future. That case is pending in Washington.

The New York order covers security futures, not commodities like bitcoin. But a federal judge has now said, at least preliminarily, that a contract with no expiration does not look like a future.