Mentioned in This Article
1. SEC Backs CFTC in the Single Stock Perpetual Futures Lawsuit
The Securities and Exchange Commission has filed a court brief supporting the Commodity Futures Trading Commission in a New York lawsuit over single stock perpetual futures, details of which emerged on November 11, 2026. The filing opposes an injunction sought by a Wall Street trade group, while investor advocates Better Markets and two former senior SEC officials are urging the judge to halt the products.
The case sits at the center of one of the most consequential jurisdictional questions in American derivatives markets: whether leveraged contracts that track individual U.S. stocks are futures, which fall under the CFTC, or security-based swaps, which belong to the SEC. The answer will determine which rulebook applies, which investor protections attach and which firms are allowed to offer the products to American customers.
The SEC's filing itself has not been made broadly available for independent review, and the agency's arguments are known through descriptions of the brief. Even so, the outline of its position is clear enough to change the shape of the dispute, because it places the current leadership of the securities regulator on the same side as the futures regulator it is supposedly being sidelined by.
2. What Are Single-Stock Perpetual Futures?
Single-stock perpetual futures are leveraged derivative contracts that track the price of an individual company's shares and, unlike traditional futures, never expire. A trader can hold a position indefinitely rather than rolling it from one dated contract to the next, which is the defining feature of the product family the market calls perps.
Perps were popularized in crypto trading, where they became the dominant way to take leveraged positions on assets such as Bitcoin and Ether. Because there is no expiry date to pull the contract price back toward the underlying asset, perpetual contracts typically rely on periodic payments between long and short traders to keep prices anchored. Extending that structure to individual equities is what makes the current applications novel for U.S. regulated venues.
Three operators sought permission to list these contracts: Coinbase, the prediction market company Kalshi, and Bitnomial, an exchange owned by Payward, the parent company of Kraken. Their rule filings went to the CFTC, and on November 2 the contracts were deemed approved after the agency's review window lapsed without action. That procedural route, rather than an affirmative vote, became a central point of contention for opponents.
3. Who Sued the CFTC and Why
The legal challenge came from the Capital Markets Alliance, a trade group whose members include the exchange operator Cboe and the market maker Citadel Securities. The alliance filed suit against the CFTC in the U.S. District Court for the Southern District of New York and is seeking a preliminary injunction to stop the contracts from trading.
The alliance's core argument is that the products have been placed in the wrong regulatory box. In its view, a contract whose value is derived from a single company's shares is a security-based swap, and security-based swaps are overseen by the SEC under the framework Congress set up after the 2008 financial crisis. Futures, by contrast, are supervised by the CFTC. If the contracts are swaps, the alliance contends, the CFTC had no business letting them go live through its own approval process.
The exchanges that won approval have pushed back in court. Coinbase, Kalshi and Payward, joined by trading firms DRW Holdings and Jump Trading and the crypto investment firm Paradigm, filed their own brief supporting the CFTC's position. That coalition of crypto-native venues and established proprietary trading firms illustrates how the fight cuts across the traditional divide between digital asset companies and legacy market participants.
4. What the SEC Told the Court
The SEC's brief takes aim at a central storyline in the alliance's complaint, namely that the CFTC acted unilaterally and left the securities regulator out of the process. The agency is said to stress that it reviews CFTC rule changes and that the two regulators have been working together on single-stock perps.
In the language attributed to the filing, the SEC described the portrayal of a "CFTC gone rogue," along with the notion that the SEC was absent from the process, as mistaken. That is a pointed rebuttal: the alliance's case depends heavily on the idea that one agency overstepped while the other stood aside, and the supposed victim of that overreach is now telling the court it was involved all along.
For the judge weighing a preliminary injunction, the views of the agency whose turf is allegedly being invaded carry practical weight. Courts deciding whether to freeze a market typically consider the likelihood that challengers will succeed on the merits, the harm that could follow without relief and the broader public interest. An SEC that disclaims any injury to its authority makes the alliance's argument about regulatory harm harder to sustain.
5. Why the SEC's Brief Matters, and What It Leaves Open
Opposing an injunction is not the same as endorsing the CFTC's legal classification, and the SEC appears to have been careful about that distinction. The agency took no position on the fundamental question of whether the contracts are futures or security-based swaps, according to descriptions of the brief.
It also gave no indication of how it will handle a separate decision that is still pending. The SEC faces a December 31 deadline to determine whether to overturn the exchanges' rules governing the products. That leaves open the possibility that the securities regulator could oppose an emergency court order today while still exercising its own review powers later in the year.
In other words, the brief narrows the dispute without settling it. The SEC has signaled that it does not consider itself a bystander and does not want the court to halt trading on the theory that it was cut out, yet it has preserved its freedom to act on the underlying rules through its own channels before the year ends.
The filing also produces an unusual split inside the securities regulator's own community. The agency's current leadership is now on one side of the case, while two of its former senior officials have lined up on the other, giving the court competing accounts of what the SEC's mission requires.
6. Former SEC Officials Join Better Markets in Seeking a Halt
On November 10, Better Markets, a Washington-based investor advocacy organization, asked the court for permission to file a friend-of-the-court brief backing the alliance's request for a preliminary injunction. Amicus briefs allow parties that are not directly involved in a lawsuit to present arguments and expertise that the judge may find relevant.
Two prominent former SEC figures signed on. Allison Herren Lee previously served as an SEC commissioner and as the agency's acting chair. John C. Coates, a professor at Harvard Law School, is a former general counsel of the SEC. Their participation lends institutional weight to the argument that the products threaten protections the securities regulator was created to enforce.
Dominick Freda, legal director at Better Markets, framed the case in sweeping terms. In a statement, he accused the CFTC of trying to reverse 90 years of investor protections for the benefit of Kalshi, Coinbase and others. That figure refers to the federal securities laws enacted in the 1930s, which established disclosure requirements, anti-fraud rules and the SEC itself.
Freda argued that putting the word futures on the contracts does not change what they are. In his view, they are security-based swaps and must be governed by SEC rules, whatever label their sponsors choose.
7. The Leverage Concern at the Heart of the Opposition
Better Markets has focused heavily on the risks to ordinary investors. Freda described the contracts as "shadow stocks," products that give the economic experience of owning a share without the protections that come with buying the share itself.
He put the leverage embedded in the products at roughly six times. At that level, he warned, a market move of about 16% could erase an investor's entire position. The arithmetic is straightforward: when a trader controls six dollars of exposure for every dollar posted, a decline of about one-sixth in the underlying price consumes the full amount committed.
Single stocks can easily move by that much in short periods, particularly around earnings announcements, regulatory news or broader market shocks. Opponents argue that retail customers drawn in by the familiarity of household company names may not fully appreciate how quickly leveraged positions can be wiped out, and that the securities framework exists precisely to manage those risks through suitability standards, disclosure and oversight of intermediaries.
Supporters of the products, including the exchanges and trading firms backing the CFTC, have taken the opposite view in court, siding with the futures regulator's decision to let the contracts proceed. Their filing aligns them with the CFTC's position that the contracts can be offered on its regulated venues.
8. How the Fight Fits Into the Broader Turf Battle
Disputes over the boundary between the SEC and the CFTC are as old as the two agencies' overlapping mandates. Products that blend features of securities and commodities derivatives have repeatedly forced courts, lawmakers and regulators to decide who is in charge, and the arrival of crypto-native market structures has made those questions more frequent.
Perpetual contracts are a particularly sharp test because they borrow a design that grew up largely outside traditional regulation and apply it to the most traditional of assets, listed company shares. Coinbase and Kraken built their businesses in digital asset trading, while Kalshi made its name with event contracts. Their entry into equity-linked derivatives brings them into direct competition with established venues represented by the alliance.
That competitive dimension is not lost on observers. The plaintiffs include some of the most powerful operators in U.S. equity and options markets, while the defendants' supporters include companies trying to expand from crypto into broader financial products. The legal question is framed in terms of statutory definitions, but the outcome will also influence who captures trading activity in a new product category.
9. What Comes Next for Stock Perps
The immediate decision belongs to the federal court in the Southern District of New York, which must rule on the alliance's motion for a preliminary injunction. It will weigh briefs from the CFTC, the exchanges and trading firms supporting it, the SEC, and the Better Markets coalition that includes Allison Herren Lee and John C. Coates.
The second milestone is the SEC's December 31 deadline to decide whether to overturn the exchanges' rules. Because the agency has declined so far to say whether it views the contracts as futures or swaps, that decision could prove as important as anything the court does, and it could reshape the products' future even if the injunction request fails.
Until then, single-stock perpetual futures remain caught between two regulators, a well-funded industry challenge and a public debate over whether they represent a useful new trading tool or a leveraged shortcut around decades of securities law. For Coinbase, Kalshi and Bitnomial, the coming weeks will determine whether a product they have already won approval to list can survive its first serious legal test.