On June 4, Terry Duffy, chairman of CME Group, criticized perpetual futures, calling them “a disaster waiting to happen.” He warned that US regulators could destabilize financial markets by allowing US investors access to perpetual futures contracts.
Shares of major US stock exchanges are falling as investors worry that these futures contracts will change competition across asset classes, according to Reuters.
The Commodity Futures Trading Commission (CFTC) opened the US market on May 29
Commodity Futures Trading Commission consent The first US regulated perpetual futures contract was introduced by Coinbase and Kalshi on May 29.
Unlike traditional futures contracts, perpetual futures never expire, allowing traders to hold them indefinitely. It also comes with significant leverage of up to 50 to 1, which means the entire position can disappear on a price swing of just 2%.
Such contracts have been traded on third-party platforms such as Binance, Bybit, and Hyperliquid for some time. Bringing the CFTC in-house was about expanding US regulatory safeguards rather than leaving risks in uncharted territory, according to Cat Moshin-Rosenman.
As Cryptopolitan reported earlierMichael Selig, head of the Commodity Futures Trading Commission (CFTC), said the agency would roll out “real” perpetual futures within weeks, moving them before Congress rather than waiting for broader legislation to structure the cryptocurrency market.
Retail traders don’t understand how financing costs drain their positions
Duffy claimed that the legitimate market function “has been replaced by a speculative market, and that is in no one’s interests.” He is particularly concerned about individual investors.
Retail users often rely on automatic liquidation systems that are activated during price declines, prompting traders to exit whether they want to or not. Many ordinary investors don’t understand how funding rate costs affect their positions, Duffy said. He worries that unprepared individuals end up being filtered out of contracts they shouldn’t be part of in the first place.
Duffy also feels that the CFTC rushed approvals for these complex products. He noted that the product was new and complex, as the agency itself described it, and argued that the CFTC shortchanged its comprehensive review guidelines when it approved it.
Cboe stock fell 9%, and CME lost 4% as investors priced in new competition
The approval of the first US-regulated perpetual cryptocurrency futures contract has sent shares of traditional exchange operators plummeting. Cboe Global Markets shares fell 9% on June 2, and CME and InterContinental Exchange, the parent company of the New York Stock Exchange, both fell about 4%.
Investors fear that regulators will approve similar futures contracts in stock and commodity markets, putting direct competition to existing financial derivatives platforms.
“The question is how quickly criminals can get approved across other asset classes, such as stocks and commodities,” said Bill Katz, an analyst at TD Coin.
Companies target retail speculation, not institutional hedging
Despite the market’s anxiety, many Wall Street analysts believe that the major stock exchanges will not be hurt much in the short term. Patrick O’Shaughnessy of Raymond James said the scams are “not designed for hedging, but for retail-oriented speculation,” which makes it hard to believe they will replace existing liquidity.
RBC’s Ashish Sapdra agreed, saying competitive risks are manageable due to structural differences between futures and traditional futures. Duffy even downplayed any threat to the CME’s business, noting that 85% to 90% of its volume comes from institutional clients who have little interest in perpetual contracts.
The CFTC will review each application for perpetual futures contracts on its own merits. If the asset class is something such as agricultural products, precious metals or securities, full compliance with Regulation 40.3 may be required.
Whether Duffy’s warning about systemic risks extends beyond cryptocurrencies depends on whether applications for these other asset classes are filed.
