Latest developments: Kalshi’s launch of CFTC-regulated crypto perpetuals has reignited a long-standing debate over financial market definitions.
- Kalshi’s John Lothian and Udesh Jha joined The Policy Protocol to discuss this topic.
- John Lothian, publisher of John Lothian News, argued that perpetual contracts resemble swaps because they involve recurring bilateral cash flow payments via funding rate mechanisms.
- Udesh Jha, head of FX analysis at Kalshi, countered that perpetuals function like futures contracts because they are exchange-traded, centrally cleared and designed to track underlying spot markets.
- The debate follows the recent approval and launch of crypto perpetuals on Kalshi under CFTC supervision.
The disagreement: Both parties view the same product from different regulatory perspectives.
- Lothian said perpetuals differ from traditional futures contracts because payments at the funding rate create continuous cash flows between market participants, a feature he associates with swaps.
- Jha argued that funding rates simply make funding costs explicit rather than building them into futures prices, making perpetuals a more efficient version of existing futures markets.
- Perpetual contracts also eliminate the need for traders to roll over their positions into new contract months, reducing friction and costs, according to Jha.
Why it’s important: Classification could determine who can access products and under what rules.
