Coinbase Stock Perp Plans Face Federal Court Battle

Coinbase is pushing to bring stock perps to the US market, allowing American retail traders to hold leveraged long or short positions on Apple, Nvidia, and Tesla around the clock. The company filed paperwork last week with the SEC and CFTC to register as a security futures exchange and broker-dealer.

However, a lawsuit filed by CME Group is challenging the CFTC's authority to approve perpetual futures contracts. CME argues that these contracts are swaps under the Dodd-Frank Act, not futures, and that the CFTC's approval of similar products from Kalshi violates regulatory precedent.

Coinbase has already operated as a CFTC-designated contract market since 2020 and is working with both the SEC and CFTC to bring more financial products into the US market. The company's international product uses a funding rate mechanism, where periodic payments are made between traders on opposite sides of the market.

The proposed contracts would require dual approval from both the SEC and CFTC, as they fall under the jurisdiction of both agencies. A court ruling that perpetual contracts are swaps rather than futures could affect not only Coinbase's product but also existing crypto perpetual futures products in the US market.