CFTC asks court to dismiss CME's lawsuit over crypto perpetual futures approval

CFTC files to dismiss CME lawsuit over crypto perpetual futures

The Commodity Futures Trading Commission (CFTC) asked a U.S. federal court on Wednesday to throw out CME Group's lawsuit over the agency's approval of cryptocurrency perpetual futures.

In a motion filed in the District Court of Columbia, the CFTC called CME's case "much ado about nothing," arguing that the exchange's claims of competitive injury lack legal standing and substance.

What the CFTC's motion says

The CFTC said CME had not plausibly alleged a competitive injury because CME is free to list the same perpetual futures as Kalshi, the exchange that received approval. The agency also noted that CME has publicly said its own customers are not asking for those products.

CME's monthly volume figures cited in the brief show its bitcoin and ether-related futures were all higher in June and August than in May, the month the order was issued. The CFTC argued that even if CME's competitive injury claims had substance, they are "entirely self-inflicted" because CME refuses to list perpetual futures.

The CFTC also said CME would not recover from any supposed injury even if the commission reclassified perpetual futures as swaps, because Kalshi and other exchanges could simply offer the contracts under that new classification. The agency indicated that regulatory and tax differences between swaps and futures are not significant enough to support CME's allegations.

Background of the lawsuit

On June 18, CME sued the CFTC over the agency's May 29 order approving Kalshi's bitcoin perpetual futures contract and its statement allowing other designated contract markets (DCMs) to list similar contracts as futures. DCMs are exchanges allowed to trade futures contracts.

CME argued that these products should be classified as swaps under the Commodity Exchange Act and Dodd-Frank, and that the CFTC circumvented regulations to make the approval. In its complaint, CME said the approval "ushered new entrants into CME's retail futures market that seek to compete with CME for retail customers."

What happens next

The CFTC requested an oral hearing. CME's opposition to the motion is due Oct. 2. The Block has reached out to CME for comment.

Key points

• The CFTC filed a motion to dismiss CME's lawsuit over the approval of crypto perpetual futures.
• The CFTC said CME lacks standing and that its competitive injury claims are without substance.
• CME's monthly volume figures showed its bitcoin and ether futures were higher in June and August than in May.
• The CFTC argued CME's lawsuit would stifle innovation and competition, contrary to the purpose of the Commodity Exchange Act.

What is confirmed

The CFTC filed a motion on Wednesday to dismiss CME's lawsuit, and the motion argued that CME lacks standing because it can list the same products. The CFTC also said CME's volume figures were higher after the approval, and it requested an oral hearing. CME's opposition is due Oct. 2.

Why it matters

This case concerns whether crypto perpetual futures should be treated as futures or swaps, which affects how they are regulated. The outcome could influence competition among exchanges offering these products.

Sources

• The Block