Kalshi’s Newest Product Has No Expiration Date. The CFTC Approved It as a Future Anyway, and Now CME is Suing
The Chicago Mercantile Exchange filed suit Wednesday against the CFTC and its chairman in the U.S. District Court for the District of Columbia, challenging a May 29 order that approved Kalshi’s Bitcoin perpetual contract as a futures product.
The complaint asks the court to vacate the order and issue a declaration that cryptocurrency perpetual contracts are swaps under the Commodity Exchange Act, not futures, and that the CFTC therefore cannot authorize exchanges to list them as the latter.
The case turns on a product category that has been enormously popular in offshore cryptocurrency markets for years but has never been available on a regulated U.S. exchange until last month. Understanding why CME is suing requires understanding what a perpetual contract actually is, and what it is not.
The Difference Between a Perpetual and a Futures Contract Lies in the Expiration Date
A standard futures contract is an agreement to buy or sell an asset at a specific price on a specific future date. That expiration date is not incidental to the product’s structure. It is the mechanism that forces the contract’s price to converge to the actual market price of the underlying asset because, at expiry, the contract settles at the spot price. The discipline of a fixed settlement date is precisely what Congress had in mind when it defined futures as contracts of sale of a commodity for future delivery.
A perpetual contract has no expiration date. As the name suggests, a position can be held indefinitely. Instead of converging at expiry, the contract uses a mechanism called a funding rate: when the perpetual trades above the spot price of the underlying asset, holders of long positions make periodic payments to holders of short positions, and vice versa. The funding rate is designed to keep the perpetual’s price aligned over time, but it depends on market participants responding rationally to economic incentives rather than on the structural compulsion of a fixed settlement date.
Under the Dodd-Frank Act, the CEA defines a swap as any agreement that provides for the exchange of payments based on the value of a commodity and transfers price risk between parties without conveying any ownership interest in the underlying asset. A perpetual contract actually fits that definition precisely: it exchanges funding payments based on Bitcoin’s price, transfers price risk between the long and short sides, and never delivers Bitcoin or its cash equivalent to anyone. By the same token, it cannot be a contract of sale of a commodity for future delivery because there is no delivery, and no future date on which anything is due.
CME’s complaint makes this point with particular force by noting that Chairman Selig himself publicly acknowledged the perpetual is “unlike a traditional futures contract” because it lacks a fixed expiration date, and yet approved it as a futures product. The CFTC’s own order does not contain the word “swap” and does not engage with the Dodd-Frank provision that defines swaps. The word is simply absent, and that is what CME is taking issue with.
The CFTC Spent Years Prosecuting This Product as a Swap, but Approved Kalshi’s Application in One Day
The classification question would be awkward enough if the CFTC were approaching perpetuals for the first time, but that is not the case. In its 2023 action against Binance, the CFTC stated explicitly that “Binance’s perpetuals are swaps,” citing their transfer of price risk, lack of expiration, and use of a funding-rate mechanism. The CFTC took the identical position in enforcement actions against BitMEX, Mango Markets, Deridex, and KuCoin, each time treating perpetual contracts as swaps subject to the heightened regulatory requirements Congress imposed after the 2008 financial crisis.
That regulatory history is at the center of CME’s arbitrary-and-capricious claim, which may ultimately prove more durable than the statutory classification argument. Under the Administrative Procedure Act, an agency that departs from its established position must acknowledge the departure and provide a reasoned explanation for it. The Kalshi Order does neither of those. It does not acknowledge the CFTC’s prior enforcement actions, does not explain why perpetuals should now be classified differently, and relies almost exclusively on a pre-Dodd-Frank case law that predates the statutory definition of a swap entirely. The complaint describes the order as a rubber stamp of Kalshi’s own application, reproducing the company’s arguments almost verbatim.
The procedural facts certainly don’t help the situation. The CFTC received Kalshi’s application on May 28 and approved it the following day, despite regulations allowing up to 45 days for review, with extensions available for novel or complex products. The CFTC itself acknowledged the application raised novel and complex issues, yet decided it overnight with no public comment whatsoever. By comparison, CME’s own S&P 500 Dividend Index futures contract received a 1,834-day review period before approval. It’s a fairly tough look for anyone trying to argue that the CFTC took a long and thorough look at Kalshi’s application.
A One-Man Commission Making Market-Reshaping Decisions is Fueling the CME’s Suit
Chairman Selig is currently the CFTC’s sole confirmed commissioner, acting alone on a body Congress designed to have five members. The Kalshi Order and accompanying policy statement were approved on his vote alone, with the policy statement noting simply that “Chairman Selig voted in the affirmative. No Commissioner voted in the negative.” But of course, there were no other commissioners to vote in the negative.
That concentration of authority is not illegal on its own. But it is the condition under which a sweeping regulatory change happened overnight: a product that had never been available on a U.S. regulated exchange, that the agency had consistently treated as a swap requiring heightened post-crisis regulation, was approved as a lightly regulated future in a single day, for a single company, with the order simultaneously authorizing any futures exchange to self-certify similar products without prior approval.
Kalshi self-certified more than a dozen additional cryptocurrency perpetuals within days of the order, and the products generated over $1 billion in trading volume within a week of launch. Chairman Selig called his actions historic. Unsurprisingly, now the CME is calling them unlawful.
CME is Suing for an Even Playing Field With a New Competitor
CME’s standing argument is worth examining because it is both legally necessary and commercially revealing. CME has offered retail-accessible Bitcoin futures since 2017, including Micro Bitcoin futures designed specifically for smaller-account customers seeking regulated cryptocurrency exposure. Kalshi has explicitly positioned itself as a competitor to CME, with CEO Tarek Mansour stating in a February 2025 interview that “the comp for Kalshi is CME,” and describing Kalshi as “a next-generation CME for the 21st century” in a press release. Those are pretty telling statements.
The competitive injury is textbook: a regulatory approval allows a direct competitor to enter CME’s retail futures market, offering a product that competes with CME’s existing offerings, on terms that CME’s own products cannot use because they comply with the regulatory requirements Congress imposed on swaps. If the CFTC’s classification is wrong, Kalshi gets the favorable futures tax treatment under Section 1256 of the tax code, reduced margin requirements, and freedom from swap dealer registration requirements, none of which CME’s comparable products can access.
The CFTC characterized its own actions as “bringing markets that were offshore for too long” to the United States, and Selig noted that CME and other incumbents were “afraid of this technology” because it limited their transaction fees. CME’s response is that the incumbents are not afraid of the technology but of being undercut by a regulator that changed the rules to benefit a single competitor without legal authority to do so.
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