Judge Keeps Stock Perps Trading but Faults CFTC Authority

Stock perpetual futures can keep trading on Kalshi, Coinbase Derivatives and Bitnomial — for now. U.S. District Judge Valerie Caproni denied an emergency bid to halt them on Nov. 3, hours after the CFTC said the products could begin trading on U.S.-regulated exchanges. But in the same order she found the challengers are likely to prove the agency overstepped its statutory authority.

The plaintiff is the Capital Markets Alliance Association, a New York nonprofit whose members include Cboe Global Markets, Citadel Securities and the Healthy Markets Association, according to a declaration from its secretary, Adam Ford. The group sued the CFTC and Chairman Michael S. Selig in the Southern District of New York, case No. 1:26-cv-09608, seeking to undo the approvals of filings by all three exchanges.

Caproni wrote that the group "is likely to succeed on the merits" of its claim that the CFTC lacks authority to allow perpetual derivatives on individual stocks for retail investors on its regulated platforms.

What does the ruling actually change?

Nothing yet, operationally. The order leaves the approvals in place. It does not decide the case, nor the alliance's separate motion for a preliminary injunction.

The legal reasoning is where the pressure sits. "Because the perpetual contracts, by definition, do not provide for a 'sale for future delivery of a single security,' they cannot be a security future over which the CFTC has statutory and regulatory authority," Caproni wrote. The contracts "appear to satisfy the definition of a swap," she said — a category that falls to the Securities and Exchange Commission.

She also found the balance of equities and the public interest favor the alliance, writing that the agency's actions "seem to represent a major disruption to the equities market."

The restraining order failed on one prong alone. The judge called declarations from Cboe, Citadel Securities and Healthy Markets "conjectural" and said they failed to show irreparable harm that was "actual and imminent."

Kalshi was already listing four single-stock perps by Wednesday morning — Qualcomm, McDonald's, Amgen and Costco — with maximum leverage of 4.9 times. Bloomberg Law reported the judge signaled she might ultimately side with the Wall Street firms opposed to the products.

A turf fight with crypto venues in the middle

The dispute turns on a label. Selig's Nov. 3 statement said the contracts were deemed approved under Commission Regulation 40.3 as security futures products, a category the CFTC and SEC oversee jointly. The exchanges filed on Sept. 18. The agency let its 45-day review period lapse without a written order.

The alliance argues a contract with no expiration date and no delivery obligation is a security-based swap, and that Congress limited retail trading in those to national securities exchanges under full SEC oversight. Its complaint says the CFTC "invited a parallel, synthetic market in U.S. stocks to grow outside the exclusive jurisdiction" of the SEC.

A CFTC spokesperson called the lawsuit "troubling" and told Reuters: "Our markets should be governed by law, not litigation campaigns intended to block innovation."

For crypto-native venues, the stakes reach past equities. Perpetuals are the core product of crypto derivatives, and Kalshi and Coinbase have used the CFTC's framework to bring them onshore. The agency approved the first U.S.-listed bitcoin perpetual on May 29. That approval already faces its own challenge: CME Group sued the CFTC in June, arguing a contract built on exchanged funding payments is a swap, not a future. That case is pending in Washington.

The New York order covers security futures, not commodities like bitcoin. Still, a federal judge has now said, preliminarily, that a contract with no expiration does not look like a future.

Next deadline: the CFTC's opposition is due Friday, Nov. 6, with the alliance's reply due Tuesday, Nov. 10. Judge Lorna G. Schofield, now assigned to the case, can change that schedule.