CFTC sued over single-stock perpetual futures days after clearing crypto perps path

Group backed by Citadel Securities takes the CFTC to court over stock perps

A new trade group representing traditional financial firms has sued the U.S. Commodity Futures Trading Commission (CFTC) to stop its approval of single-stock perpetual futures — open-ended derivatives contracts that never expire, a trading format that until now has mostly existed in overseas crypto markets. The suit was filed Tuesday, the same day the CFTC announced it was clearing the way for these contracts on stocks.

The group, called the Capital Markets Alliance (CMA), says the CFTC approved trading that legally belongs to the Securities and Exchange Commission (SEC), the U.S. regulator that oversees securities.

Key points

• The Capital Markets Alliance filed a lawsuit Tuesday in the U.S. District Court for the Southern District of New York, seeking to eliminate the CFTC's new policy on single-stock perpetual futures.
• The suit argues the products are securities-based swaps, which fall under SEC jurisdiction, and that the CFTC violated the Administrative Procedure Act by failing to explain the policy or why it contradicts the agency's earlier stance.
• The CMA is a new organization with little history, but says it is backed by exchanges, broker-dealers and investment firms including Cboe and Citadel Securities.
• The CFTC's announcement came roughly five months after the agency first cleared a path for bitcoin perpetual futures in the U.S.
• The CFTC did not immediately respond to a request for comment on the new lawsuit.

What the CFTC chairman said when approving stock perps

When CFTC Chairman Mike Selig announced the policy on Tuesday, he said it "builds on that milestone by extending the availability of the perpetual futures contract instrument in the U.S. beyond digital commodities and into traditional securities." The earlier milestone was the agency's move to clear a path for bitcoin perps, with the aim that a thriving overseas market would move to the U.S.

Other critics, and the earlier crypto perps fight

The American Securities Association also criticized the policy on Tuesday. "By labeling stock perps as security futures, the CFTC sidestepped the SEC's jurisdiction and Congress' ban on selling security-based swaps to retail investors," said ASA President and CEO Chris Iacovella in a statement.

This is not the first legal challenge to the CFTC's approach. Its earlier action on crypto perps drew a lawsuit from CME Group, which argues perpetual futures are not actually futures because they have no end date — that they are really swaps, which carry different regulatory treatment. The CFTC rebuffed that legal stance in October, according to CoinDesk's earlier reporting.

What is confirmed

• The CFTC announced approval of single-stock perpetual futures on Tuesday.
• The Capital Markets Alliance filed a federal lawsuit the same day, seeking to strike down the policy.
• The suit argues the products are securities-based swaps under SEC jurisdiction and claims an Administrative Procedure Act violation.
• Chairman Mike Selig announced the policy and its wording is on record.
• The CMA says its members include Cboe, Citadel Securities and Healthy Markets Association, per a group spokesman.
• CME Group previously sued over the crypto perps approval on similar "they are swaps" grounds.

What is still unclear

• The CFTC has not yet responded to the new lawsuit, so the agency's position is unknown.
• The CMA has little track record; the lawsuit appears to be the only significant action it has taken so far, so its scope and staying power are unclear.
• No court has ruled on the lawsuit, and no timeline for a decision is known.

Why this matters for crypto and Wall Street

The CFTC's crypto perps roadmap was meant to pull an overseas trading market into U.S. regulation. Extending the same contract format to stocks was the next step, and it is now being challenged in court on the same core question that has shadowed the crypto version: whether perpetual contracts are futures, which the CFTC can approve, or swaps, which face different rules and a congressional ban on selling securities-based swaps to retail investors. The outcome of this case could shape how — and whether — the perps model expands in U.S. markets.

What happens next

The case is now before the U.S. District Court for the Southern District of New York. The CFTC has not yet commented on the suit, and no hearing date or ruling timeline has been announced.

Sources

• CoinDesk — CFTC gets into legal clash over stock perps after having cleared path for crypto version
• Business Wire — Capital Markets Alliance suit announcement
• CFTC — Chairman Mike Selig statement
• CoinDesk — CFTC clears perpetual futures on stocks
• CoinDesk — CFTC rebuffs CME legal stance over perpetual futures

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