The SEC backs the CFTC in court over US stock perpetual futures, which a judge says the agency probably had no power to approve

Update, 12 November 2026, 05:53 UTC: The SEC has entered the case as a friend of the court: Judge Lorna Schofield accepted its brief on 10 November, together with the one from Coinbase, Kalshi and Payward, but refused Coinbase’s request to speak for its group at oral argument, the court docket shows. The SEC’s brief is not on the free public docket; according to The Block, which quotes it, the agency backs the CFTC and calls the picture of “a CFTC gone rogue, and an SEC gone missing” mistaken. The alliance’s reply of 10 November, citing that brief, says the SEC “has not yet determined” whether these contracts are security-based swaps. Better Markets with two former SEC officials, and the American Securities Association, have asked to file briefs for the alliance; no hearing date has been set.

Coinbase, Kalshi and Kraken’s parent company Payward asked a federal court in Manhattan on Monday 9 November to keep stock funding payment between longs and shorts, settled every few hours, keeps the contract price close to the spot or index price.">perpetual futures trading in the United States, filing a joint amicus brief on the side of the Commodity Futures Trading Commission. Trading firms DRW and Jump Trading, along with Paradigm, signed it too. They are answering a lawsuit by the Capital Markets Alliance Association, a new trade group whose members include Cboe Global Markets and Citadel Securities, which wants the CFTC’s approval of these contracts thrown out. Judge Lorna Schofield accepted the brief on 10 November but turned down Coinbase’s request to argue for the group at the hearing.

The brief arrives with the case already tilted against the agency on the law. On 3 November, Judge Valerie Caproni refused to halt trading, but her three-page order also found the alliance “likely to succeed on the merits” of its claim that the CFTC had no authority to approve the products. In her reading, the contracts “do not appear to satisfy the definition of a security future” and look like swaps instead, which belong to the Securities and Exchange Commission. That view is preliminary. It is also the backdrop to everything filed since.

One more filing landed late that Monday, and it changed the picture. The SEC, which is not a party, entered an appearance and asked for leave to file its own amicus brief. Judge Schofield granted it on 10 November, and the brief is now “deemed filed”, the court docket shows. Its text has not been posted on the free public docket, so what the securities regulator argues is known from press reports and from the alliance’s reply, which cites it. According to The Block, Crypto Briefing and CoinGape, the SEC sides with the CFTC. The alliance reads the same brief as leaving the central legal question open.

What the stock perpetual futures fight is about

Three CFTC-regulated exchanges filed on 18 September 2026 to list perpetual contracts on large US stocks: Coinbase Derivatives, KalshiEX and Bitnomial Exchange. Bitnomial is the link to Kraken: Payward bought it earlier this year, the amicus brief says. The CFTC had 45 days to object or extend its review. It did neither, so when the period ran out on 2 November the three filings were “deemed approved” under its rules, without a written decision. The complaint dates the approval to 3 November, the day Selig announced that trading could begin.

CFTC Chairman Michael Selig explained the outcome the next day. The equity perpetuals “were deemed approved by the Commission, pursuant to Commission Regulation 40.3, as security futures products,” he said in a statement of 3 November, adding that they remain subject to both the commodities and the securities laws. He pointed to the memorandum of understanding the CFTC and SEC signed in March 2026 as the sign that the two agencies now work together.

The alliance sued the same day. Its complaint names the CFTC and Selig as defendants, not the SEC. It accuses the CFTC of allowing “a parallel, synthetic market in U.S. stocks to grow outside the exclusive jurisdiction” of the SEC, and asks the court to vacate the approvals, to declare the contracts security-based swaps, and to stop trading while the case runs.

The complaint describes the members without listing them. They “operate equity and options exchanges, handle and execute retail and institutional customer orders, and make markets,” it says, and one member is itself an association. In a sworn declaration, the alliance’s secretary, Adam Ford, names three members: Cboe, Citadel Securities and the Healthy Markets Association, a nonprofit. Each of the three filed a declaration of its own with the emergency motion.

What a single-stock perpetual is

A perpetual is a derivative with no expiry date. A trader takes a long or short position on, say, Costco shares, and keeps it open as long as the margin holds. No shares change hands, ever. Kalshi’s product documents say holders get neither shares nor voting rights, and dividends are handled as cash adjustments, according to CryptoSlate, which read them.

What keeps the contract’s price close to the stock’s price is a funding payment. When the perpetual trades above the share price, longs pay shorts; when it trades below, shorts pay longs. Coinbase’s own filing describes it that way, as quoted in the complaint. The mechanism comes straight from crypto, where perpetual futures on bitcoin and ether are the most traded derivatives on offshore exchanges.

Two things change when this model moves to US stocks. First, the contracts trade when the stock exchange is shut: Kalshi’s run from Sunday evening to Friday afternoon, US Eastern time, according to the same CryptoSlate report. Second, they bring leverage on a single share to the retail accounts of a prediction-market app. Weekend trading on thin books has already gone wrong offshore: tokenized chip-stock perpetuals lost $51.6 million in ten minutes on a weekend in October, as we reported in our account of that weekend crash.

Why the label decides who regulates, and who can trade

The classification settles which regulator is in charge and whether retail customers can trade the contracts at all.

If a stock perpetual is a security future, it can trade on CFTC-regulated futures exchanges that also notice-register with the SEC, which is the route the three exchanges took. The two agencies share oversight, and retail customers can trade.

If it is a security-based blockchain, where users swap tokens directly from their own wallets without handing custody of their funds to a company.">swap, the 2010 Dodd-Frank rules apply. The complaint says Congress allowed such swaps to reach retail investors only on national securities exchanges under the SEC’s full oversight. The amicus brief adds that the SEC has never built a framework for an exchange-traded security-based swap open to retail clients. In practice, the crypto firms argue, that classification would end US retail access and push the trading offshore.

The legal hinge is the word “future”. The Commodity Exchange Act defines a security future as a contract of sale “for future delivery” of a single security. The alliance says a contract that never expires never delivers anything, so it cannot be a future. The crypto firms answer that the law says “future”, not “specific future date”, and that cash settlement when a position is closed counts as delivery. On their reading, a contract that expires in a thousand years would be a future while an identical one with no expiry would be a swap, which they call absurd.

What Judge Caproni wrote on 3 November

The order was signed after a telephone conference on the day of the lawsuit, by Judge Caproni sitting in the emergency part of the court. It runs through the four tests for a temporary restraining order and splits them three to one.

On the merits she sided with the alliance. Because perpetual contracts “by definition, do not provide for a sale for future delivery of a single security,” she wrote, they cannot be security futures under CFTC authority, and they “appear to satisfy the definition of a swap.” She cited a 1980 appeals court ruling saying the seller of a futures contract commits to deliver at a fixed date.

On the balance of interests she also sided with the alliance. The CFTC’s actions “seem to represent a major disruption to the equities market,” the order says, and the public would be served by preventing it before it happens.

The alliance lost on the last test, irreparable harm. The declarations from its members were “conjectural” about the harm they would suffer, the judge found, describing things that could happen rather than harm that was actual and imminent. Without that, no restraining order. Trading could start.

The order also set the briefing timetable: the CFTC’s opposition by Friday 6 November and the alliance’s reply by Tuesday 10 November, subject to change by the judge assigned to the case. On 4 November the case went to Judge Lorna Schofield, who confirmed the schedule and said oral argument, and possibly an evidentiary hearing, would be set at a later date.

The CFTC’s answer: standing, inaction and Cboe’s own words

The CFTC filed its opposition on 6 November. It leads with Cboe. Last year, the agency says, Cboe told the CFTC that perpetual futures “simply represent another futures instrument,” and Cboe today sells “continuous futures” with expiries up to ten years away that it markets as a “perpetual-style futures product.” Calling those futures but true perpetuals swaps would, in the CFTC’s words, “exalt form over substance”.

The agency then attacks the plaintiff itself. It calls the alliance “newly-minted” and says it “lacks the indicia of a true membership organization,” so it has no standing to sue. It also argues there was no agency action to challenge: the exchanges filed, the Commission did nothing, and the products became tradable by operation of its rules. Finally it asks the judge not to decide such a question “on such a short fuse,” noting that the Chicago Mercantile Exchange’s challenge to its bitcoin perpetual approval of May 2026 is running on a normal schedule in Washington.

A CFTC spokesperson went further in an email to CoinDesk, calling the lawsuit troubling: “Our markets should be governed by law, not litigation campaigns intended to block innovation.”

What Coinbase, Kalshi and Payward told the court

The 36-page amicus brief, attached to a letter motion filed by Coinbase’s lawyers, speaks for six firms. Coinbase, Kalshi and Payward run or own the three exchanges. DRW, Jump Trading and Paradigm describe themselves as firms that take part in, or are exploring, equity perpetuals as liquidity providers or investors.

Beyond the definition of a future, the brief makes three practical points. The SEC was involved throughout: the agencies asked for public comment together in June 2026, the exchanges registered with the SEC for security futures in September, and their listing rules were published by the SEC, which can cancel them but “has not done so”. The brief says the SEC, “and CMAA’s members,” were at the table from the very start, since the alliance itself wrote to both agencies on 2 November.

The brief also argues that the alliance’s members list single-stock derivatives every day and could launch perpetuals of their own. And it cites a Reuters report for the figure that perpetuals traded more than $90 trillion worldwide in 2025, as evidence that the activity will happen elsewhere if US venues are shut. That figure is the brief’s claim, not a number the court has examined.

Kalshi’s position here is familiar. The company is already fighting states over its prediction markets, which our profile of Kalshi follows, and in October the CFTC sued Utah to stop that state’s case against the company.

The SEC backs the CFTC, two former SEC officials back the alliance

The SEC’s lawyer, Ezekiel Hill, filed the agency’s request late on 9 November, after a first attempt was flagged as a deficient docket entry. The judge granted it the next day.

CourtListener’s free archive does not hold the brief, so its content is known through reporting. The Block, which quotes the brief, wrote on 11 November that the SEC rejects the alliance’s account of “a CFTC gone rogue, and an SEC gone missing”. The agency says the CFTC’s rule changes remain subject to SEC review and describes frequent cooperation between the two regulators as vital to overseeing equity perpetuals, The Block reported. Crypto Briefing and CoinGape also reported that the SEC backs the CFTC.

Those accounts do not say whether the SEC takes a view on the central question: are these contracts security futures or security-based swaps? The alliance reads the brief as leaving it open. “The SEC has not yet determined whether single-stock perpetuals are security-based swaps,” its reply of 10 November says, citing pages 1, 2 and 6 of the SEC’s brief. The alliance turns that against the CFTC, which it says “rushed ahead rubber-stamping these applications” without a reasoned explanation.

Better Markets took the other side. Joined by Allison Herren Lee, a former acting chair of the SEC, and John Coates, a former SEC general counsel, the group asked on 10 November to file a brief supporting the alliance’s request for an injunction. In its release, Better Markets calls the products securities swaps. It says they carry leverage of about six to one, so that a 16% market move could wipe out an investor’s whole portfolio, and that they give holders no voting rights, no dividends and no duty of best execution. “The CFTC is attempting to gut 90 years of investor protections on behalf of Kalshi, Coinbase and others,” said Dominick Freda, its legal director.

The American Securities Association, which represents regional broker-dealers and investment advisers, also asked to file a brief for the alliance, on the harm to retail investors if trading goes on while the case runs, according to its letter to the court. The letter says the alliance consents and the CFTC objects that the request comes too late. Two more requests arrived on 10 November: one from five securities-law professors (John Coffee, James Cox, Gina-Gail Fletcher, George Georgiev and Joel Seligman), one from Chicago Mercantile Exchange Inc., the CME Group exchange already challenging the CFTC’s approval of a bitcoin perpetual in Washington. The docket entries do not say which side these two briefs support. By the docket’s last update, at 12:10 p.m. New York time on 11 November, the judge had ruled on none of the four requests.

Tokenized shares are a separate file at the SEC. They go through its innovation exemption, under which the OKXICE venue opens on 23 November after 67 companies objected.

What traded, and what Cboe and Citadel say they fear

Kalshi moved first. It listed perpetuals on Qualcomm, McDonald’s, Amgen and Costco in the days after the approval. CryptoSlate counted 24-hour notional volume of $33.0 million on Costco, $11.1 million on Qualcomm, $2.9 million on McDonald’s and $2.7 million on Amgen at 13:49 UTC on 6 November. Those are small numbers next to the more than $1 trillion of daily US stock trading the complaint cites. They are also the first week.

Coinbase Derivatives and Bitnomial had announced no start date by 10 November. The approvals cover dozens of other large US companies.

The incumbents’ worry is partly about protection and partly about business. In letters cited in the complaint, Cboe, Nasdaq and members of Congress from both parties warned that perpetual trading could move the price of the underlying shares, enable manipulation across markets and invite regulatory arbitrage. The complaint also says plainly that members would have to compete for the same customers and trades with platforms that, in its view, work outside the rules Congress set. In an October submission to the SEC, Cboe argued that stock-perpetual trades would escape the consolidated surveillance that covers US equities, CryptoSlate reported.

Wall Street is not on one side, either. Intercontinental Exchange, owner of the New York Stock Exchange, has backed a separate venue for US perpetuals on Hyperliquid, covered in our report on ICE and trade[XYZ]. That plan is not part of this lawsuit.

Key dates in the case

What happens next

With the alliance’s reply filed on 10 November, Judge Schofield now has to decide on the preliminary injunction, the order that could stop trading while the case continues. No date for oral argument had been set by the docket’s last update on 11 November, and the judge has asked the parties to say whether facts are disputed enough to need an evidentiary hearing. The CFTC and Selig must answer the complaint by 25 November.

Three things are open. The first is whether Judge Schofield reads the law the way Judge Caproni did; Judge Caproni’s view was formed within hours of the filing and does not bind her. The second is standing: if the CFTC convinces the court that the alliance is not a proper membership group, the merits may never be reached. The third is the SEC. Its silence was a central point of the crypto firms’ brief. The agency has now taken the CFTC’s side in court, according to press accounts of its brief, while, on the alliance’s reading, leaving the futures-or-swap question undecided. Four amicus requests filed on 10 November still await the judge’s answer.

Until Judge Schofield rules on the injunction, Kalshi’s four stock perpetuals stay open for trading, with a preliminary finding on the record that the agency which approved them probably lacked the power to do so.