Kalshi Launched Stock Perps the Same Day a Judge Said the CFTC Likely Lacked the Power to Approve Them

The CFTC approved perpetual futures on individual US stocks by doing nothing. Kalshi quietly started trading them. And on the very same day, a federal judge said the agency probably never had the power to allow them in the first place.

The products are live, but they may be running on borrowed time. The challengers are Wall Street incumbents, and the next round in court starts after November 10.

Approved by silence

On Tuesday, November 3, CFTC Chairman Mike Selig said equity perpetual futures can trade for the first time on US exchanges registered with both the CFTC and the SEC. The contracts "were deemed approved by the Commission, pursuant to Commission Regulation 40.3," he said, adding that American traders would no longer be "forced to turn to offshore, and often unregulated, venues."

Deemed approved means the clock ran out. Under CFTC rules, a filed contract is approved if the agency takes no action within 45 days. Kalshi, Coinbase Derivatives and Bitnomial filed on September 18, and the window closed on November 2. There was no written order explaining the decision, unlike Kalshi's bitcoin perp, which got one on May 29. In June the CFTC's own policy statement had said equity perps "would benefit from review by the Commission and the U.S. Securities and Exchange Commission."

Perpetual futures never expire. They track the underlying asset through regular funding payments, which lets traders hold leveraged positions indefinitely.

Four stocks, overnight hours

Kalshi launched without an announcement. As of 5:30 a.m. ET on November 4, its page listed four contracts, on Qualcomm, McDonald's, Amgen and Costco, each with maximum leverage of 4.9 times, offered by Kalshi Prime LLC. Combined 24-hour volume was about $7.85 million, led by Qualcomm at about $3.85 million.

The filing covers up to 58 contracts, including Apple, Nvidia and Tesla. Its listing standards allow companies worth at least $100 billion and a minimum margin of 15.5%, about 6.5 times leverage. Trading runs from 6 p.m. ET Sunday to 5 p.m. ET Friday, including overnight, when US stock exchanges are closed.

Cboe and Citadel sue

The same Tuesday, the Capital Markets Alliance Association sued the CFTC in the Southern District of New York. Its secretary, Adam Ford, said members include Cboe Global Markets, Citadel Securities and the Healthy Markets Association. The group argues the products are security-based swaps that belong to the SEC, and that the CFTC broke the Administrative Procedure Act. "The hasty roll out of financial products that circumvent well-established regulatory frameworks erodes investor protection," Ford said.

US District Judge Valerie Caproni denied the alliance's emergency restraining order, which is why trading could start. But she found the group "is likely to succeed on the merits" of its claim that the CFTC lacks the authority to allow perpetual derivatives on individual stocks for retail investors. The contracts "appear to satisfy the definition of a swap," she wrote, and the CFTC's actions "seem to represent a major disruption to the equities market."

She refused the order only because the alliance had not shown harm that was "actual and imminent." The CFTC must answer the request for a preliminary injunction by November 6, and the alliance replies by November 10. An injunction could halt Kalshi's four stock perps within weeks and block the Coinbase Derivatives and Bitnomial approvals too.

"Our markets should be governed by law, not litigation campaigns intended to block innovation," a CFTC spokesperson told Reuters. The SEC declined to comment. The agency has a habit of fighting in court on Kalshi's side; last month it sued Utah to stop the state from enforcing its gambling laws against Kalshi's prediction markets.

The incumbents saw it coming

The objections were already on file. On October 14, CME's general counsel told the SEC that perpetual contracts "by definition lack an essential element of a futures contract." Nasdaq said they "are not, and cannot be, security futures products." Cboe warned the trading would fall outside the Consolidated Audit Trail, and its CEO, Craig Donohue, said the issue "is about investor protection for securities trading and the rule of law."

Cboe also has money on the line: it runs SEC-regulated options exchanges. CME separately sued the CFTC in June over Kalshi's bitcoin perp. And a fourth venue is waiting. OG.com, the Crypto.com-owned exchange formerly known as Nadex, filed stock perps on September 24, and its 45-day window ends November 8.

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