Judge Says CFTC Likely Lacked Authority to Approve Kalshi's Stock Perpetuals

A Manhattan judge found a group backed by Cboe and Citadel Securities likely to prove that perpetuals on single stocks belong to the SEC, not the CFTC. Trading began anyway.

• Capital Markets Alliance Association sued the CFTC after Kalshi, Bitnomial and Coinbase applications to list single-stock perpetuals were deemed approved when the CFTC let its review period lapse
• Judge Valerie Caproni refused a restraining order on 3 November for lack of proven harm, but found the contracts likely to be swaps under SEC jurisdiction
• The CFTC calls perpetuals futures, citing a 2025 Cboe letter, and says its silence was not reviewable agency action
• According to the group's reply, Kalshi listed more than 50 stock perpetuals within two days, with about $375 million in 24-hour notional volume
• Like the sports event contract cases, it tests the reach of CFTC jurisdiction, on a different legal question

Right on the Law, Short on Harm

The Capital Markets Alliance Association, whose members, according to the filings, include Cboe Global Markets, Citadel Securities and Healthy Markets Association, sued in the Southern District of New York on 2 November. KalshiEX, Bitnomial Exchange and Coinbase Derivatives had asked the CFTC on 18 September to approve perpetuals on individual stocks as security futures; the review closed with no notice of non-approval, so they were deemed approved. CFTC Chairman Michael Selig, its sole commissioner, said on 3 November that they "can begin trading for the first time on CFTC-registered exchanges", the complaint records.

In an order on 3 November, Judge Valerie Caproni refused a restraining order because the declarations were "conjectural" about harm, but found that "The perpetual contracts in question do not appear to satisfy the definition of a 'security future'", and that "such contracts appear to satisfy the definition of a swap, which are subject to regulation by the Securities and Exchange Commission, not by CFTC". It added: "The CFTC's actions seem to represent a major disruption to the equities market."

No Expiry, Funding Payments and Leverage

A perpetual never expires and never delivers the stock. To keep it near the share price, the complaint explains, longs pay shorts when it trades above that price and shorts pay longs when below: hourly on Coinbase, eight-hourly on Bitnomial, daily on Kalshi, whose schedule covers 55 stocks and three ETFs or ADRs. Proposed margin of about 15% to 15.5% lets $1,000 control roughly $6,450 to $6,667 of exposure, it says, which the American Securities Association calls "roughly 6.5-to-1 leverage".

The Alliance argues these are security-based swaps, which Congress lets retail investors in the United States buy only on SEC-registered exchanges. The CFTC alleged perpetuals were swaps in its 2020 BitMEX case, it notes, before approving Kalshi's bitcoin perpetual as a future in May 2026, which the Chicago Mercantile Exchange is challenging.

The CFTC Uses Cboe's Own Words

The CFTC's 6 November opposition says cash-settled futures deliver nothing either, and quotes Cboe's 21 May 2025 letter: "Perpetual futures simply represent another futures instrument through which market participants can meet different investment goals and manage risk." It cites Cboe's continuous futures, with expiries up to 10 years, calls the Alliance "contrived", denies taking reviewable action and notes the SEC has 60 days to abrogate the exchanges' rule filings.

The 10 November reply says the Cboe letter did not address security futures or single-stock perpetuals, that Kalshi listed four contracts on 3 November and more than 50 within two days, and, citing the SEC's amicus brief, that the SEC "has not yet determined whether single-stock perpetuals are security-based swaps".

According to the court docket, Kalshi Inc., Coinbase, DRW Holdings, Jump Trading, Paradigm Operations and Payward have appeared. On 10 November the court accepted a Coinbase-led amicus brief and let the SEC file one; CME, Better Markets and securities law professors also asked to file. Answers are due on 25 November, and oral argument is yet to be scheduled.

Kalshi's Push Beyond Event Contracts Now Runs Through Court

The complaint quotes Kalshi's chief executive calling stock exposure "the next step towards Kalshi becoming a full-service financial exchange". Caproni's view does not bind Judge Lorna G. Schofield, who has the injunction motion, but it went against the exchanges. Kalshi, refused injunctions by the Second Circuit on 3 November in its sports fights with New York and Connecticut, now faces a second front, against securities market incumbents rather than state gaming regulators.

The CFTC Wants the Swap Label for Sports but Not for Stocks

A swap on a single share is a security-based swap, which the SEC regulates, so the CFTC needs these contracts to be futures. With sports the label works the other way: the CFTC has proposed defining event contracts as swaps, inside the definition on which its claim of exclusive jurisdiction against the states rests. The questions differ, but in each the Commission favours the classification that keeps a product with it.

Inaction Is Both the Defence and the Weakness

Saying deemed approval is not reviewable may shield the CFTC procedurally, but it concedes there is no reasoned order to defend. The Cboe letter is real ammunition, yet it discussed perpetual futures generally, and the SEC's position remains open.

A judge has already said the CFTC probably overstepped, and only the absence of proven harm kept trading open. If Schofield agrees with Caproni on the law, Kalshi's financial-exchange push will meet the SEC's rulebook before it scales.