Coinbase, Kalshi and four other financial firms have backed the US Commodity Futures Trading Commission (CFTC) in a legal dispute over stock perpetual futures. The companies want a federal court to uphold the regulator's authority to allow these contracts on US exchanges.
In a November 9 court filing, Coinbase and Kalshi joined Kraken parent Payward, DRW Holdings, Jump Trading and Paradigm Operations in supporting the CFTC. Their intervention follows a judge's finding that the regulator likely exceeded its legal authority when allowing these products to trade.
The six companies asked the US District Court for the Southern District of New York to accept their legal arguments. They maintain that perpetual futures tied to individual stocks qualify as security futures under existing federal laws.
Stock perpetual futures allow investors to trade contracts linked to share prices without owning the underlying stocks. Unlike traditional futures, these contracts have no expiration date, allowing traders to maintain positions without renewing contracts.
The companies argue that the absence of an expiration date does not automatically make the products security-based swaps. They say US law does not require security futures to expire on a specific date.
Their filing also states that the Securities and Exchange Commission (SEC) participated in regulatory discussions about the contracts. The firms argue that existing rules allow both the SEC and CFTC to oversee security futures.
Coinbase Derivatives, KalshiEX and Bitnomial Exchange submitted applications to list stock perpetual futures on September 18. Those applications became effective on November 2 after the CFTC's review period expired.
The Capital Markets Alliance Association filed its lawsuit against the CFTC on November 3. Its members include Cboe Global Markets, Citadel Securities and the Healthy Markets Association.
The group argues that stock perpetual futures qualify as security-based swaps, which fall under SEC oversight. It also claims the CFTC failed to explain its decision or properly consider risks to investors.
In a public statement, alliance secretary Adam Ford said the rollout of these products "erodes investor protection." The association wants the court to overturn the approvals and prevent further trading under the disputed rules.
However, the six companies supporting the CFTC reject that legal interpretation. They argue that existing federal rules already provide a system for regulating stock futures through joint SEC and CFTC oversight.
US District Judge Valerie Caproni raised doubts about the CFTC's authority in a November 3 ruling. She found that the Capital Markets Alliance was likely to succeed in challenging the regulator's decision.
Caproni stated that the contracts "do not appear to satisfy the definition of a 'security future.'" She also found that they appeared to qualify as swaps, which would place them under SEC regulation.
Nevertheless, the judge denied the alliance's request for an immediate trading halt. She ruled that the group had not demonstrated a likelihood of imminent, irreparable harm from allowing trading to continue.
Consequently, the disputed approvals remain in effect while the court considers a separate request for a preliminary injunction. The judge's findings do not represent a final ruling on the CFTC's authority.
The court required the CFTC to submit its response by November 6. It also set November 10 as the deadline for the Capital Markets Alliance to reply, subject to any scheduling changes.
ALSO READ: BNB Chain Records USD 441.5M Tokenized Stock Growth, Outpacing Solana