CME Group to sue CFTC over perpetual futures approval

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CME sues CFTC over futures

Highlights

CME Group will file a lawsuit against the CFTC on Thursday, challenging its recent approval of perpetual futures contracts for U.S. exchanges.
Shares of CME Group, Cboe Global Markets, and Intercontinental Exchange declined after CFTC approved Coinbase and Kalshi to offer perpetual crypto futures to U.S. investors.
CME announced CEO Terry Duffy will step down next year, with Lynne Fitzpatrick named as his successor and becoming CME's first female CEO.

Legal challenge targets new derivatives approval

CME confirmed to Reuters in an emailed statement on Thursday that it will sue the Commodity Futures Trading Commission over the approval of perpetual futures, after Chief Executive Terry Duffy said in a CNBC interview that the filing will come on Thursday.

Perpetual futures, often called perps, are derivatives contracts without an expiration date, allowing traders to hold positions indefinitely instead of rolling them over. The products also allow high levels of leverage, often reaching 50-to-1, which can sharply increase exposure to market swings.

Duffy has been openly critical of the instruments and says earlier this month that the combination of extreme leverage and automatic liquidation models poses a significant risk to retail investors. He also criticizes the CFTC approval process as rushed, arguing that a traditional full review is bypassed for what he describes as a novel and complex product.

The CFTC does not immediately respond to Reuters' request for comment.

Competitive pressure grows for established exchanges

Last month, cryptocurrency exchange Coinbase and prediction market platform Kalshi say they will launch perpetual crypto futures after receiving the CFTC's approval. The move marks the first time these instruments become available to U.S. investors through domestic, regulated exchanges.

Investor concerns over the long-term competitive impact are already visible in the market. Shares of CME Group, Cboe Global Markets and Intercontinental Exchange, the parent of the New York Stock Exchange, fall after the approval as investors assess the threat that perpetual futures could pose to established exchange operators.

The lawsuit disclosure also comes on the same day CME says Duffy will step down next year after about a decade as chief executive. He is set to be succeeded by company insider Lynne Fitzpatrick, who will become CME's first female CEO.

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