CFTC Approves True Perpetual Futures for US Regulated Exchanges

The Commodity Futures Trading Commission (CFTC) has taken a significant step to allow true perpetual futures in US-regulated markets. On October 3, the CFTC issued a no-action letter stating it would not enforce actions against Coinbase Derivatives or designated contract markets that eliminate expiration dates for broad-based security index futures. This decision, effective October 5, aligns with the structure of perpetual futures prevalent in offshore digital currency markets.

The approval came after a request by Coinbase Derivatives CEO Jane Downey on October 1. Typically, such regulatory changes require a 10-business-day waiting period, but the CFTC allowed immediate implementation. However, the changes come with conditions: contracts must reflect broad-based security indices, exchanges must notify traders with open positions, and risk disclosures must be provided. The deadline for this relief is October 20.

Coinbase noted that its products already function similarly to true perpetual futures, using funding rates to align prices with market rates despite having expiration dates extending up to 25 years. The request covered six perpetual-type futures: US500, Tech100, Defense10, AI10, China10, and Coin50. The key change is removing the expiry date, which no longer matched the actual trading behavior of these products.

This decision builds on previous CFTC actions, including the authorization of perpetual futures for assets like bitcoin in May. The move also reflects the CFTC's broader perspective on 24/7 trading markets. Coinbase aims to reduce market confusion by avoiding different expiry terms for economically similar products, aligning with its strategy for 24/7 market operations.

The shift raises questions about whether clearer US rules can attract perpetual trading from offshore and decentralized venues to regulated domestic markets. While this could increase onshore liquidity, it may also bring leverage risks associated with perpetual contracts. Galaxy Research reported that crypto futures open interest, including perpetuals, rebounded to about $114 billion by late July, highlighting the substantial demand and potential risks.