Key Takeaways:
- CME Group will sue the CFTC over its approval of perpetual futures
- Perpetual futures offer up to 50-to-1 leverage with no expiration date
- Coinbase and Kalshi received CFTC approval to launch the products last month
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CME sues CFTC over perpetual futures as 50-to-1 leverage draws fire
CME Group will sue the Commodity Futures Trading Commission over its approval of perpetual futures, Chief Executive Officer Terrence Duffy said, escalating a battle over crypto derivatives that can offer as much as 50-to-1 leverage.
"I'm always up for a good battle. I've never shied away from one," Duffy said in an interview on CNBC's "Fast Money," adding that the company will file the lawsuit on Thursday.
The lawsuit challenges the CFTC's decision last month to allow Coinbase Global Inc. and prediction market platform Kalshi to launch perpetual crypto futures on US-regulated exchanges, marking the first time such instruments will be available to domestic investors. Perpetual futures, unlike traditional futures contracts, have no expiration date, allowing traders to maintain positions indefinitely without rolling over contracts. Duffy had warned at a conference earlier this month that the combination of extreme leverage and automatic liquidation models poses a significant threat to retail investors who may not fully grasp the corrosive effects of funding rate costs.
Shares of CME Group, Cboe Global Markets and Intercontinental Exchange fell after the CFTC's approval, as investors worried the move could pose a long-term competitive threat to incumbent exchanges. The lawsuit, which CME confirmed in a statement Thursday, could reshape the regulatory framework for crypto derivatives in the US, potentially forcing the CFTC to issue clearer guidance on whether perpetual futures should be classified as swaps or futures.
Duffy, who joined CME Group as a runner in the lean hog pit in 1980 and took over as CEO about a decade ago, announced plans to step down from the role next year. Lynne Fitzpatrick, currently president and chief financial officer, will take over as CME's first female CEO on March 1, 2027, with Duffy transitioning to executive chairman.
The CFTC did not immediately respond to a request for comment. CME Group, which traded an average daily volume of 28.1 million contracts last year, has criticized the agency's approval process as hasty, saying it bypassed a traditional full review for what the regulator deemed a novel and complex instrument.
This article is for informational purposes only and does not constitute investment advice.
[1] CME CEO Terrence Duffy says the exchange operator will sue CFTC over perpetual futures[2] CME to sue commodities regulator over perpetual futures, CEO Duffy tells CNBC[3] CME CEO Terry Duffy on suing CFTC: I'm always up for a good battle, 'I won't shy away from this'[4] CME Group chief Terry Duffy to step down next year and transition to executive chairman role
