By Krystal Hur and Vicky Ge Huang
CME Group sued the top U.S. derivatives regulator Thursday to thwart Kalshi, an upstart prediction-markets platform, from encroaching on its turf as the nation's leading futures exchange.
The Commodity Futures Trading Commission recently approved Kalshi's plan to list perpetual futures contracts, known as "perps," a trendy flavor of derivative that never expires and trades 24/7. In its suit, filed in federal court in Washington, CME argued that the CFTC violated U.S. law by classifying Kalshi's perps as futures and not swaps. In doing so, the CFTC decision allows Kalshi to sidestep rules intended to protect the economy from the "special dangers that unregulated swaps posed," lawyers for the exchange operator wrote.
Perps, which grew out of the cryptocurrency markets, allow traders to use leverage that can amplify their gains -- and their losses. The CFTC has said the agency's actions bring perpetuals into a framework that can limit excessive leverage, volatility and systemic risk.
CME, the world's most-valuable exchange operator, is the dominant marketplace for derivatives ranging from interest-rate swaps to futures tied to the S&P 500. But its shares have tumbled around 9% since the CFTC greenlighted Kalshi to list perpetual futures, and some worry perps will pose a serious threat to the industry's entrenched players -- especially CME. Kalshi said it has seen more than $5 billion in perps volumes since their launch.
The rules of the road on swap dealers were set by Dodd-Frank, the landmark measure that rewrote financial regulations in the wake of the 2008-09 crisis. Dealers in swaps are subject to capital and margin requirements.
"If allowed to stand, it would enable Kalshi -- and any other futures exchange seeking to list similar perpetual contracts -- to circumvent the strict regulatory requirements set by Congress," lawyers for CME wrote in the suit filed Thursday morning.
The suit also alleges that the CFTC's approval of perpetual futures has inflicted "textbook competitive injury" on CME, since those products compete with traditional futures and derivatives like those offered by the exchange operator. The suit argues that Kalshi is explicitly targeting CME's retail customer base by marketing perpetual futures as a simpler alternative to CME's crypto futures.
"These agency actions allow entry into the market of a product targeting retail investors that is intended to, and will, directly compete with CME's products aimed at the same customer base," lawyers for CME argued.
Kalshi declined to comment.
"Rather than compete in the marketplace, the CME has decided to undertake lawfare against the agency and the Trump administration's pro-innovation agenda," a CFTC spokeswoman said in a statement. "Incumbents fear the future and having to compete on a level playing field.
"We look forward to addressing their claims and dismissing this frivolous lawsuit."
Perps first appeared overseas in 2016 and were unavailable in the U.S. until recently, when the CFTC laid out a framework for registered U.S. platforms to launch the contracts. The CFTC also approved the listing of perps tied to cryptocurrencies at Kalshi, and allowed Coinbase's U.S. customers to access its global perpetuals through an affiliate.
"Competition and innovation are the bedrock of vibrant financial markets and we commend the CFTC for onshoring modern contract structures that benefit American investors," Faryar Shirzad, Coinbase's chief policy officer, said in a statement.
Terry Duffy, CME's chief executive, denied that the timing of his retirement, announced Wednesday, had anything to do with concerns about competition from perpetual futures in a CNBC television interview that same day.
"I'm always up for a good battle. I've never shied away from one, and I won't shy away from this," Duffy said on CNBC. "We are not taking this lightly."
Duffy has made headlines in recent weeks for criticizing the launch of perpetual futures in the U.S., stating at a Piper Sandler conference in early June that he is concerned about the high leverage available on offshore perps, which sometimes offer traders exposure to assets that are magnified by more than 100 times.
Kalshi has said that the maximum leverage it allows on perpetual futures is around six times, and that perpetual futures are not any riskier than traditional futures offered by CME and other exchanges.
"I am protecting the integrity of the marketplace," Duffy told CNBC on Wednesday. "The markets grow when there's regulatory clarity, and I think that they go the other way when there's regulatory uncertainty, and I think that's what's going on right now."
Write to Krystal Hur at krystal.hur@wsj.com and Vicky Ge Huang at vicky.huang@wsj.com
(END) Dow Jones Newswires
June 18, 2026 12:01 ET (16:01 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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