The Securities and Exchange Commission (SEC) has submitted a court brief supporting the Commodity Futures Trading Commission (CFTC) in a legal dispute over perpetual derivatives linked to individual U.S. stocks. The intervention underscores growing regulatory disagreement about which agency should oversee these products.
The Capital Markets Alliance (CMA) sued last week seeking to overturn CFTC approvals of equity perpetuals, arguing the CFTC overstepped its authority and failed to comply with the Administrative Procedure Act, which sets standards for federal agencies when proposing regulations. The CMA also contended that the SEC's definition of derivatives encompasses these products and requested the court vacate the approvals.
The SEC rejected the CMA's characterization, stating that the CFTC acted within proper bounds and that the agencies regularly collaborate on financial market regulation. "The SEC's amicus brief addresses why that depiction—of a CFTC gone rogue, and an SEC gone missing—is mistaken," the agency said.
Several major trading and crypto companies filed a joint court brief backing the CFTC, including Coinbase, Kraken's parent company Payward, Kalshi, DRW Holdings, Paradigm, and Jump Trading. Coinbase, Kalshi, and Payward each received approval to launch perpetual contracts tied to U.S. stocks on November 2.
Opposition to the products remains substantial. Better Markets and former SEC Commissioner Allison Herren Lee filed briefs supporting the CMA's position. Better Markets argued that these contracts should be subject to securities laws due to their structure and potential risks, stating that the instruments could leave retail traders vulnerable to significant losses and pose risks similar to those from the 2008 financial crisis.
