Coinbase, Kalshi and Kraken Parent Back CFTC in Lawsuit Over Single-Stock Perpetual Futures

Coinbase, Kalshi, Kraken parent Payward and several crypto trading firms have lined up in support of the Commodity Futures Trading Commission in a federal lawsuit that challenges the agency's approval of perpetual futures on individual U.S. stocks, a case brought by a trade group backed by Cboe Global Markets and Citadel Securities.

Crypto firms file in support of the CFTC

According to CoinDesk, Coinbase Global, Kalshi, Payward, DRW Holdings, Jump Trading and Paradigm filed a letter backing the CFTC with the U.S. District Court for the Southern District of New York. The case was brought by the Capital Markets Alliance, which argues that single-stock perpetual contracts belong under the jurisdiction of the Securities and Exchange Commission rather than the CFTC.

The court docket for the case, Capital Markets Alliance Association v. Commodity Futures Trading Commission (1:26-cv-09608), shows that on Nov. 9 Coinbase filed a letter motion seeking to file a proposed amicus curiae brief. Attorneys also entered appearances that day on behalf of Kalshi, DRW Holdings and Jump Trading, Paradigm Operations and Payward. The Securities and Exchange Commission separately filed a notice of appearance and a motion for leave to file its own amicus curiae brief on Nov. 9.

Perpetual futures are derivatives that let traders take positions on an asset's price without an expiration date. They are widely used in crypto markets, and the newly approved contracts extend that structure to individual equities. CoinDesk reported that applications by Coinbase, Kalshi and Payward to list U.S. stock perpetuals were deemed approved in early November.

Who is suing and why

The Capital Markets Alliance filed its complaint on Nov. 3 against the CFTC and its chairman, Michael Selig, under the Administrative Procedure Act, the docket shows. In a statement the same day, Cboe said the alliance includes Cboe, Citadel Securities and the Healthy Markets Association.

"Cboe has joined this action alongside some of the largest U.S. market participants and investor advocates because we believe the CFTC's actions threaten to erode the regulatory framework that has protected investors and governed U.S. securities markets for more than nine decades," Cboe Chief Executive Craig Donohue said. He said securities-related products "belong on registered securities platforms" and should be subject to the protections required under U.S. securities laws.

The TRADE reported that the alliance contends the contracts are security-based swaps under the SEC's exclusive jurisdiction, and that the CFTC gave no explanation for its decision. The complaint asks the court to vacate the approvals, declare the products security-based swaps and bar the approvals from taking effect while the case is pending. "The hasty roll out of financial products that circumvent well-established regulatory frameworks erodes investor protection and undermines the integrity and resiliency of the American financial system," said Adam Ford, the alliance's secretary.

A CFTC spokesperson called the lawsuit "troubling" in an email to CoinDesk when it was filed. "Our markets should be governed by law, not litigation campaigns intended to block innovation," the spokesperson said.

Judge denied emergency relief but questioned CFTC authority

On Nov. 3, U.S. District Judge Valerie Caproni denied the alliance's request for a temporary restraining order, according to the docket. In the order, the judge found the alliance likely to succeed on its claim that the CFTC lacks statutory authority to allow perpetual derivatives on individual stocks to be offered to retail investors on CFTC-regulated platforms. She wrote that the contracts do not appear to meet the definition of a security future, because they do not provide for a sale for future delivery of a single security, and that they appear instead to satisfy the definition of a swap regulated by the SEC.

The judge also found that the balance of equities and the public interest favored the alliance, writing that the CFTC's actions "seem to represent a major disruption to the equities market." She denied the order because the declarations submitted did not demonstrate that the alliance's members were likely to suffer irreparable harm without emergency relief.

The case has since been assigned to U.S. District Judge Lorna G. Schofield. The court set Nov. 6 for the CFTC's opposition to the alliance's motion for a preliminary injunction, and the CFTC filed its opposition brief that day. The alliance's reply was due Tuesday, Nov. 10. In a Nov. 4 endorsement, Judge Schofield said oral argument, and possibly an evidentiary hearing, would be scheduled at a later date.

Contracts already trading

Selig said in a Nov. 3 statement that the equity perpetual contracts could begin trading that day on CFTC-registered exchanges and had been deemed approved as security futures products, RG reported. The approvals covered KalshiEX, Bitnomial Exchange and Coinbase Derivatives, according to the court order described in that report. As of early Nov. 4, Kalshi's stock perpetuals page listed contracts on Qualcomm, McDonald's, Amgen and Costco.

The dispute comes as bitcoin trades near $75,000. The Crypto Times reported that bitcoin was at about $74,766 as of 06:00 UTC on Nov. 10, citing CoinGecko data, after touching a low near $73,700 in late Nov. 9 trading.