Judge Lets Stock Perpetual Futures Keep Trading but Says CFTC Likely Overstepped Its Authority
Stock perpetual futures are permitted to continue trading on Bitnomial, Kalshi, and Coinbase Derivatives for the time being. A federal judge on Tuesday denied an emergency request to halt them, while concluding that the Wall Street-backed challengers will likely demonstrate the CFTC overreached its authority.
U.S. District Judge Valerie Caproni turned down the temporary restraining order on Nov. 3, following a teleconference with the involved parties and just hours after the CFTC announced the products could commence trading on regulated U.S. exchanges.
The Capital Markets Alliance Association initiated the lawsuit. According to a declaration by secretary Adam Ford, the organization is a New York nonprofit whose members include Citadel Securities, Cboe Global Markets, and the Healthy Markets Association.
The association filed its lawsuit against Chairman Michael S. Selig and the CFTC in the U.S. District Court for the Southern District of New York under case No. 1:26-cv-09608, aiming to overturn the regulatory approvals granted to all three exchanges.
Caproni wrote that the plaintiff “is likely to succeed on the merits” regarding its argument that the agency lacks the statutory authority to permit retail investors to access perpetual derivatives on individual stocks through CFTC-regulated venues.
“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,” she stated.
She further noted that the contracts instead “appear to satisfy the definition of a swap,” which falls under the purview of the Securities and Exchange Commission.
Additionally, she determined that the public interest and the balance of equities support the alliance, noting that the regulatory agency’s actions “seem to represent a major disruption to the equities market.”
However, the emergency request fell short on one condition. Caproni pointed out that the declarations provided by Healthy Markets, Citadel Securities, and Cboe were “conjectural” concerning potential member harm and failed to demonstrate any actual and imminent irreparable injury.
What the ruling does and does not do
The court order leaves the current product approvals active. It does not issue a final decision on the lawsuit or resolve the alliance’s separate motion for a preliminary injunction.
The CFTC’s opposition brief is scheduled for Friday, Nov. 6, while the alliance’s reply is set for Tuesday, Nov. 10, though the order indicates this schedule remains subject to modification by the assigned judge. Court dockets list Judge Lorna G. Schofield as assigned to the matter.
By Wednesday morning, Kalshi had already listed four single-stock perpetual contracts tied to Amgen, Qualcomm, McDonald’s, and Costco, offering a maximum leverage of 4.9 times.
Bloomberg Law reported that the judge’s remarks signaled she might ultimately rule in favor of the Wall Street institutions opposing the financial products.
A CFTC-SEC turf fight with crypto venues in the middle
At the center of the dispute is a regulatory label. Selig’s statement on Nov. 3 indicated the contracts achieved approval under Commission Regulation 40.3 as security futures products—a classification jointly overseen by the SEC and CFTC. The exchanges submitted their filings on Sept. 18, allowing the 45-day review window to expire without issuing a formal written order.
The alliance contends that a contract lacking both an expiration date and a delivery obligation functions as a security-based swap. Congress specifically restricted retail trading of such instruments to national securities exchanges under the direct oversight of the SEC.
The group’s complaint asserts that the CFTC “invited a parallel, synthetic market in U.S. stocks to grow outside the exclusive jurisdiction” of the SEC.
A spokesperson for the CFTC characterized the litigation as “troubling,” telling Reuters: “Our markets should be governed by law, not litigation campaigns intended to block innovation.”
For crypto-native trading platforms, the implications extend beyond equities. Perpetual contracts form the backbone of cryptocurrency derivatives trading, and Coinbase and Kalshi have leveraged the CFTC regulatory framework to introduce these products to the U.S. market.
The agency previously approved the country’s first listed bitcoin perpetual on May 29, leading to Kalshi launching the offering shortly thereafter.
That earlier approval also faces legal hurdles. CME Group filed a lawsuit against the CFTC in June, claiming that contracts based on exchanged funding payments operate as swaps rather than futures. That legal challenge remains pending in Washington.
While the New York ruling addresses security futures rather than commodities like bitcoin, a federal judge has now provisionally concluded that contracts without an expiration date do not resemble traditional futures.
FAQ
Did the judge ban stock perpetual futures from trading?
No, a federal judge denied the emergency request to halt them, allowing stock perpetual futures to continue trading on Kalshi, Coinbase Derivatives, and Bitnomial for now.
Who brought the lawsuit against the CFTC?
The Capital Markets Alliance Association, a New York nonprofit whose members include Citadel Securities, Cboe Global Markets, and the Healthy Markets Association, filed the lawsuit.
Why does the alliance argue the CFTC overstepped its authority?
The alliance argues that perpetual contracts lacking an expiration date and delivery obligation are actually security-based swaps, which should fall under the exclusive jurisdiction of the SEC rather than the CFTC.
What is the next step in the court case?
The CFTC’s opposition was due on Friday, Nov. 6, and the alliance’s reply is scheduled for Tuesday, Nov. 10, ahead of a final decision on a preliminary injunction.
