It is highly unusual that the largest derivatives exchange operator in the United States, CME Group, is at war with its regulator, the Commodity Futures Trading Commission (CFTC), but it is happening now in a situation brought on by the agency’s decision to allow blockchain-based perpetual futures products.
Last month, the CME sued the CFTC and its chairman, Mike Selig, challenging its decision to let prediction markets platform Kalshi and cryptocurrency exchange Coinbase (COIN) list crypto perps, decentralized derivatives contracts that allow users to speculate on the price of an asset with leverage and no expiration date.
Now both sides are awaiting a federal lawsuit that could have a significant influence on how the United States approaches this rapidly growing sector, with volume from non-U.S. criminals reportedly reaching $60 trillion last year.
CME says the agency mislabels products and therefore misenforces the law. Futures contracts need an end date, and products called perps are designed to allow traders to take a financial position on the future of an asset without any deadline. The lawsuit contends that these criminals harm its long-term futures products and alleges that the CFTC’s sudden embrace of these criminals failed to consider their ramifications.
Growing tensions between the two entities escalated at the start of the Iran conflict, which saw a surge in interest in perpetual oil price contracts traded 24/7 on offshore decentralized finance (DeFi) exchanges like Hyperliquid, as well as on blockchain prediction markets hosting oil market-related trades.
Those who support the CFTC’s reform agenda in this highly politicized schism are expressing frustration, even outrage.
“It’s incredibly unusual to see the largest exchange in America attacking its own regulator, where the regulator is basically saying that everyone who is registered, including the CME, can offer these types of products, and the CME is saying that no one should be allowed to offer them,” said Jake Chervinsky, CEO of Hyperliquid Policy Center (HPC) in an interview.
HPC is a Washington, DC-based nonprofit focused on building U.S.-compliant DeFi, with a strong focus on on-chain criminals and financial infrastructure, and supported by a $28 million initiative from the Hyper Foundation.
Shortly after CME filed suit, this disagreement took another turn when the exchange proposed expediting 24/7 trading for crude oil futures, but was blocked by the CFTC. CME Group’s attempted 24/7 West Texas Intermediate (WTI) crude oil contract is a traditional expiring futures product rather than a crypto-like perpetual swap. The CME had mentioned the desire of investors to manage their positions “every time news breaks”.
CFTC representatives declined to comment. At the time, CFTC Chairman Mike Selig said on
CME, which played a significant role in the listing of Bitcoin futures and contributed to the acceptance and adoption of cryptocurrencies in the United States, has a profound influence on commodities that the exchange has successfully exercised in Washington DC over the years, thanks in large part to its outspoken president, Terry Duffy.
“The definition of a swap is pretty clear,” he said in an interview with CoinDesk. “When two parties exchange payments, it is considered an exchange,” he said. “When trading swap contracts, this involves the requirement to maintain a five-day margin and register with the CFTC as a swap market participant.”
As such, the CFTC has not followed the protocol that is effectively the law of the land, Duffy asserted, adding a complaint that the CFTC may not be prepared to properly enforce its emerging policies against criminals, such as preventing non-U.S. traders from trading on Kalshi or other CFTC-regulated platforms. “What are you doing to prevent American participants from not participating in something that is illegal for them to do?” » asked Duffy.
“I haven’t seen an answer to this question yet, but yet they are blocking my self-certification contract 24/7,” he said.
Duffy had previously clashed with naysayers in the digital assets space, once debating with then-FTX CEO Sam Bankman-Fried over the industry’s efforts to cut out middlemen, months before Bankman-Fried’s business collapsed and he was jailed for a fraud-related conviction.
During CME’s recent second quarter earnings conference call, Duffy discussed the growing presence of perpetual futures in the market, stating that institutional clients are not using perpetual contracts for hedging purposes. He said CME has “all the technical and operational capabilities necessary to launch perpetual futures contracts” but “has not heard demand from our customers for these products.” Duffy went on to describe competitors’ insight markets as “an incubator system that I don’t pay for.”
When it comes to how futures work in traditional commodities, the structure differs from that of crypto, according to Liz Davis, partner and co-chair of the financial services practice at law firm Davis Wright Tremaine.
“These perpetual contracts that started in the crypto space are a different type of product than, say, pork belly or crude oil,” Davis said in an interview. “There’s an underlying tension with these new types of products being offered on traditional commodities. Here you have delivery issues, and trading isn’t really happening 24/7, because you have monthly contracts that you move from month to month.”
Davis said there is a lot to consider in a market in which the products criminals are linked to may be limited to trading only five days a week and set to change hands only at certain times, instead of always being available.
“You just need to think about the different issues in terms of marginal liquidity and weekend custody; staffing and resources; your monitoring now needs to extend to weekends and public holidays, etc.,” she said.
Duffy’s crypto stance is seen by crypto natives and DeFi enthusiasts as typical of how large incumbents handle innovation that could threaten their dominance.
“It’s really going to come down to this kind of political fight between this massive incumbent and the regulator trying to license challengers to that incumbent, thereby allowing competition that the incumbent doesn’t want to see happen,” said HPC’s Chervinsky, adding:
“The problem with the CME is not whether they are pro or anti-crypto. They are an incumbent who uses regulation to suppress competition, and they are willing to take opposing positions depending on the moment to try to fend off competition.”
Thus, the future of the criminals run by the CFTC remains uncertain as the CME prepares its dossier, which includes claims that the agency rubber-stamped Kalshi’s application, which was submitted a day before its approval.
“The CFTC approved the authors despite the practice of claiming that they were swaps and without issuing a settlement despite a public consultation in April 2025,” noted Jaret Seiberg, financial policy analyst at TD Cowen, saying that the CME could have “the upper hand” in this legal dispute. “This distinction is important because the regulatory and tax regimes for swaps and futures are different.”
Although the CFTC is supposed to be a five-member commission, Chairman Selig currently serves as its sole member, so he is the sole voice of the agency. And he wanted the regulator to pave the way for US criminals in the crypto space, by signing up a Kalshi product and approving customer activity at Coinbase.
“It’s interesting that this is being done by a one-person commission,” Davis said. “When you have a five-person commission, the rulemaking doesn’t move as quickly, because of the counterview. So you’re kind of deprived of that counterview, other than the CME filing the lawsuit and their comments.”
Representatives for Kalshi and Coinbase declined to comment on the criminals’ regulatory situation.
So far, Selig’s agency is opening this U.S. market through a political statement — not new regulations giving interested parties a chance to comment and try to shape the outcome. This is much the same crypto approach as its sister agency, the Securities and Exchange Commission, which has issued a wide range of new policy pronouncements without yet implementing formal, lasting rules.
The CFTC determined that a case-by-case review process was appropriate for the authors. As a result, Kalshi’s first offering saw the light of day last month and the company said it reached over $1 billion in trading volume in less than a week.
