SEC Sides With CFTC in Fight Over Stock Perps
With both regulators now defending the approvals, the stock perps from Kalshi, Coinbase and Bitnomial look safer, though one judge has already signaled doubts.
The SEC backed the CFTC against the Capital Markets Alliance, a group backed by Cboe and Citadel Securities that is suing to undo the CFTC's Nov. 2 approval of perpetual futures on single U.S. stocks.
What's the Scoop?
The Brief: The SEC called the alliance's picture "of a CFTC gone rogue, and an SEC gone missing" mistaken, per The Block. It said the exchanges' rules for the contracts still go through its own review, and it agreed with the CFTC that the alliance has no right to sue. Notably, it didn't say whether perps are futures or swaps, and it has until Dec. 31 to decide whether to overturn those exchange rules.
The Fight: The alliance argues a contract that never expires can't be a "security future," which the CFTC and SEC oversee jointly, and is really a security-based swap, which only the SEC oversees and which is much harder to sell to retail traders. Judge Valerie Caproni denied its emergency request on Nov. 3 for lack of proven harm, but found it likely to win that argument.
The Lineup: Coinbase, Kalshi, Kraken parent Payward, DRW, Jump and Paradigm filed their own brief arguing the contracts are security futures, while Better Markets and former SEC Commissioner Allison Herren Lee are asking to weigh in on the alliance's side. No hearing date is set, and the products Kalshi launched last week keep trading until Judge Lorna Schofield, who was assigned the case, rules on the alliance's bid for an injunction.
David Christopher
David is a writer/analyst at Bankless. Prior to joining Bankless, he worked for a series of early-stage crypto startups and on grants from the Ethereum, Solana, and Urbit Foundations. He graduated from Skidmore College in New York. He currently lives in the Midwest and enjoys NFTs, but no longer participates in them.
