CFTC seeks dismissal of CME crypto futures lawsuit

The U.S. Commodity Futures Trading Commission asked a federal court on Sept. 2 to dismiss CME Group’s lawsuit challenging the regulator’s treatment of cryptocurrency perpetual contracts as futures.

The CFTC argued that CME lacks legal standing because the exchange could list perpetual futures under the same regulatory policy it is challenging. The agency characterized part of CME’s claimed competitive disadvantage as resulting from its own decision not to offer comparable products.

CME filed the case in the U.S. District Court for the District of Columbia on June 18. It seeks to overturn the CFTC’s approval of Kalshi’s Bitcoin perpetual contract and a related agency policy statement.

The dismissal request represents the regulator’s position. The court has not ruled on the motion or decided whether cryptocurrency perpetual contracts should legally be treated as futures or swaps.

CFTC says CME created its alleged disadvantage

To establish standing in federal court, a plaintiff generally must show a concrete injury linked to the defendant’s conduct. It must also demonstrate that a favorable court ruling would likely address that injury.

CME claims the CFTC’s decision gave newer exchanges an unfair competitive advantage by allowing them to offer perpetual contracts under the futures framework. The exchange says those products should instead face the rules applying to swaps.

The CFTC disputes the claimed injury. It argued that CME is also a designated contract market and can seek permission to list perpetual futures under the same process available to Kalshi.

According to the regulator, any disadvantage arising from CME’s decision not to list the contracts is therefore “self-inflicted.” The agency said a party cannot establish standing by declining to use the same regulatory opportunity available to its competitors.

The CFTC also pointed to CME’s own trading figures. It said the exchange’s Bitcoin and Ether futures volumes in June and August exceeded their May levels, when the Kalshi approval was issued.

Those figures form part of the regulator’s argument that CME has not shown a concrete competitive loss caused by the approval. CME may challenge that interpretation when it responds to the motion.

Reclassification may not resolve CME’s alleged harm

The CFTC raised a second standing argument involving redressability. Even if the court classified perpetual contracts as swaps, the regulator said competing venues could still offer economically similar products.

A ruling in CME’s favor would therefore change the regulatory category without necessarily removing the competition CME claims is harming its business.

The CFTC said CME is not challenging the agency’s general authority to approve the product. Instead, the lawsuit focuses on whether the Kalshi contract fits the legal definition of futures or swaps.

The regulator also argued that CME’s competitive interests do not fall within the “zone of interests” protected by the Commodity Exchange Act provisions cited in the lawsuit. This test asks whether the interests a plaintiff seeks to protect relate to the purposes of the statute allegedly violated.

CME has presented the dispute as an issue involving regulatory consistency and investor protection. The CFTC’s motion frames it as a competitor attempting to use litigation against products it could offer itself.

CME says perpetual contracts are swaps

Perpetual contracts give traders continuing price exposure without a predetermined expiration date. They commonly use recurring funding payments to keep contract prices aligned with the referenced asset.

Traditional futures usually have fixed expiration and settlement dates. CME argues that the lack of an expiration date places perpetuals within the swap definition established under the Dodd-Frank Act.

The CFTC disagrees. It maintains that a futures contract does not require a fixed expiration date under the Commodity Exchange Act or existing regulatory interpretations.

The dispute began after the regulator approved Kalshi’s BTCPERP contract on May 29. The Bitcoin-linked product trades through KalshiEX, a CFTC-registered designated contract market.

As previously reported, the CFTC’s decision opened a regulated U.S. venue to Bitcoin perpetual futures after the products had largely remained on offshore cryptocurrency exchanges.

CME sued the regulator several weeks later. Its complaint seeks to vacate the Kalshi approval and the broader policy statement supporting the treatment of perpetual contracts as futures.

The central dispute concerns whether perpetual contracts legally qualify as futures or swaps. Each classification carries different registration, trading and oversight requirements.

CFTC defends its review of Kalshi’s contract

The CFTC reviewed Kalshi’s application under Regulation 40.3, which allows a designated contract market to request formal approval before listing a new product.

The agency concluded that the contract complied with the Commodity Exchange Act and CFTC rules. It also said perpetual designs may not be suitable for every asset and could require individual review.

CFTC Chair Michael Selig later rejected several criticisms directed at the decision. He said regulated perpetual contracts remain subject to domestic leverage, margin and customer protection requirements.

In related coverage, Selig argued that U.S. law does not require futures to carry fixed expiration dates. That interpretation now forms part of the broader legal dispute.

CME CEO Terry Duffy has criticized the approval process and warned that perpetual products could encourage excessive speculation. Kalshi has rejected that criticism and described the lawsuit as an effort to limit competition.

The companies’ statements represent opposing positions in active litigation. The court has not determined whether the CFTC followed the correct process or adopted the correct interpretation of the law.

CME response is due October 2

CME must file its opposition to the dismissal motion by Oct. 2. The CFTC has also requested an oral hearing, although the court will decide whether one is necessary.

The judge can dismiss the case on standing or other procedural grounds without resolving whether perpetual contracts are futures or swaps. Such a decision would leave the CFTC’s existing policy and Kalshi approval in place.

If the court finds that CME has standing, it could proceed to examine the substantive legal claims. Those claims include allegations that the agency misread the Commodity Exchange Act and acted arbitrarily under federal administrative law.

The case may also influence future applications from exchanges seeking to list perpetual contracts tied to cryptocurrencies, equities or commodities. Kalshi is reportedly preparing additional products, including a perpetual contract linked to WTI crude oil.

For now, Kalshi’s Bitcoin perpetual remains available under the futures framework. The CFTC’s dismissal motion begins the next stage of the case but does not settle the classification dispute.