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1. Why did Coinbase, Kalshi and four other firms file a brief in the stock perpetuals case?
Six trading and crypto firms asked a federal judge in New York on November 9 to leave perpetual futures on individual U.S. stocks in place. Coinbase, Kalshi, Payward (the parent company of Kraken and Bitnomial), DRW, Jump Trading and Paradigm submitted a friend-of-the-court brief siding with the Commodity Futures Trading Commission (CFTC) against a trade group that wants the contracts stopped.
The group they are opposing, the Capital Markets Alliance Association, is asking the court for a preliminary injunction. The firms urge the judge to deny it. Their brief also points out that the court has already turned down the alliance's earlier request for a temporary restraining order, so the products have kept trading while the case moves forward.
The dispute matters beyond the parties involved. It will help settle which federal agency has the authority over a new class of stock-linked derivatives, and whether trading in them can stay inside the United States or is pushed to venues abroad.
2. What are stock perpetual futures?
A perpetual future is a derivative with no expiration date. Traditional futures contracts settle on a fixed day, which forces traders to close out or roll their positions. A perpetual instead stays open indefinitely, and a periodic funding payment between traders who are long and traders who are short keeps its price anchored to the underlying asset.
The structure became familiar in crypto trading, where perpetuals on bitcoin and other tokens account for a large share of derivatives activity. The contracts at issue here apply the same design to shares of individual U.S. companies, so a trader can take a leveraged view on a stock's price without owning it and without a contract rolling over at a set date.
The funding mechanism is what substitutes for expiry. When a perpetual trades above the price of the underlying stock, buyers typically pay sellers, which discourages further buying; when it trades below, the flow reverses. This steady adjustment pulls the contract back toward the reference price without a settlement date, and it also means that holding a position for a long time carries an ongoing cost or credit that a conventional future does not.
Lorenzo Valente of ARK Invest said in an interview last month that he expected stock perpetuals to win approval. He named Coinbase, Robinhood and Backpack as likely competitors for the business.
3. What does the Capital Markets Alliance lawsuit challenge?
The Capital Markets Alliance Association is a New York trade group whose members operate stock and options exchanges, route customer orders and make markets. It sued the CFTC and its chairman, Michael Selig, on November 3.
The suit targets how the agency handled applications filed on September 18 by KalshiEX, Coinbase Derivatives and Bitnomial Exchange to list single-stock perpetuals. The CFTC's 45-day review window ended on November 2 without an objection, and under the agency's rules that silence means the filings are treated as approved. Kalshi began offering the contracts on more than 50 U.S. stocks on November 5. According to the complaint, Kalshi's filing covered 58 contracts, while Bitnomial's named 10 stocks, among them Alphabet and Microsoft.
The complaint raises two counts under the Administrative Procedure Act, the law that governs how federal agencies must act. The first says the approvals were arbitrary and capricious: the alliance argues that the CFTC reversed its long-standing treatment of such products as swaps without explaining why, and let the filings take effect without issuing a written order.
The second count goes to authority. The alliance says the contracts are security-based swaps, a category Congress placed under the Securities and Exchange Commission (SEC), so the CFTC had no power to approve them. It wants the approvals undone, a declaration that the contracts are security-based swaps, and an order blocking them while the case proceeds.
Adam Ford, the alliance's secretary, announced the lawsuit in a statement. He said that rushing out products that sidestep established regulatory frameworks harms investor protection and the resilience of the U.S. financial system.
4. How do the six firms answer the jurisdiction argument?
The firms rely on the structure of the statute. They argue that the law treats security futures, which the CFTC and the SEC oversee jointly, as a category separate from swaps. In their reading, equity perpetuals qualify as security futures because the statute requires delivery at some point in the future rather than on a fixed date.
On that reading, the absence of an expiry is not a loophole. The brief's central point is that a perpetual's lack of an expiration date should be seen as an improvement on the traditional design, not as a reason to push the product outside the futures framework.
They also describe the practical stakes. If the court sided with the alliance, the firms warn, equity perpetuals would move offshore, because the SEC has no framework for retail trading of exchange-listed security-based swaps. Their brief adds that the SEC has not moved to cancel the exchanges' filings, a detail they offer as a sign that the other agency has not objected to the CFTC's handling.
The CFTC has responded sharply to the case. A spokesperson called the lawsuit troubling when it was filed and said markets should be governed by law, not by litigation campaigns intended to block innovation.
5. Who is backing the alliance, and how does this fit earlier fights?
The Capital Markets Alliance says it is supported by traditional finance firms, including Cboe and Citadel Securities. The split therefore runs between established equity-market operators and a group of crypto-native and prediction-market firms that are expanding into regulated derivatives.
The case is not the first to test the agency's reach. In June, the Chicago Mercantile Exchange sued the CFTC in Washington over its approval of Kalshi's bitcoin perpetual contract, an approval that opened the door to U.S.-regulated crypto perpetuals. Taken together, the two suits show incumbent exchanges turning to the courts to contest how quickly the CFTC has allowed new perpetual products to list.
Both sides therefore frame the case as a test of how far an agency's existing rulebook can stretch to cover a product that did not exist when the statutes were written. Courts asked to decide such questions often look closely at the statutory text, and the outcome here could shape how regulators treat other novel derivatives that mix features of futures, swaps and securities.
The CFTC and the SEC have long divided responsibility for derivatives, with the CFTC overseeing most futures and swaps and the SEC overseeing securities and security-based swaps. Products that reference a single stock sit close to that boundary, which is why the label attached to them carries so much weight.
6. How does the deemed-approval process work?
Exchanges that want to list a new futures contract in the United States file a certification with the CFTC stating that the product complies with the Commodity Exchange Act and the agency's rules. The agency then has a fixed window to review it. If the window closes without an objection or a stay, the contract may be listed, and the filing is treated as approved.
That mechanism is central to the lawsuit. Here the review period ran out on November 2, and no written order accompanied the outcome. The alliance treats that as a procedural flaw, since a change in how the agency classifies a product, it says, deserves an explanation on the record. The CFTC and the firms backing it see a lawful result under the agency's own rules.
The Administrative Procedure Act matters because it lets courts set aside agency actions found to be arbitrary, capricious or beyond the agency's statutory authority. Challengers often use it to contest decisions that agencies never formally announced, which makes the question of what counts as a reviewable action an important one in cases of this kind.
7. Why does the swap-versus-security-futures label matter so much?
The categories carry different regulators, different rules for who may trade and different disclosure requirements. A swap on a single security is generally treated as a security-based swap and falls to the SEC, while a future on a single stock is a security future that both agencies share responsibility for. Which label fits a perpetual determines whose rulebook applies.
The firms say the SEC has no framework for retail trading of exchange-listed security-based swaps. If the contracts were reclassified, there would be no clear route for U.S. retail customers to trade them on regulated exchanges, which is the basis for their warning that activity would migrate offshore.
For retail traders, the question is also about protection. Onshore venues operate under surveillance, margin and reporting rules, while offshore platforms may offer similar leveraged products without those safeguards. Both sides of the case invoke investor protection, but they draw opposite conclusions about which outcome serves it.
8. What happens next in the case?
The immediate question is whether the judge grants the preliminary injunction the alliance has requested. Because the court has already declined a temporary restraining order, the contracts remain available while the request is considered, and the six firms' brief is intended to persuade the judge that they should stay that way.
A ruling for the CFTC would let U.S.-regulated venues keep listing perpetuals on individual stocks. A ruling for the alliance could return the question to the SEC and, as the firms warn, shift trading in these products to markets outside the country. No hearing date was given in the filings described here.