CFTC Chair Michael Selig Explains Rationale for Approving Perpetual Futures Contracts in the United States
Table of Contents
You might want to know
Will the approval of perpetual futures ("perps") in the U.S. increase market risk or improve safety through onshoring and regulation?
How will regulators and intermediaries ensure appropriate disclosures, suitability assessments, and risk controls for these new products?
Main Topic
Commodity Futures Trading Commission (CFTC) Chair Michael Selig recently addressed the debate over perpetual futures contracts — commonly called "perps" — during an appearance on CNBC's Fast Money. He defended the agency's decision to permit such contracts to be offered domestically, arguing that bringing these products within the U.S. regulatory perimeter allows the commission to apply rigorous oversight and safety standards. Selig framed the move as an effort to onshore a product that had been developing abroad so that it can be offered under robust rules rather than be left exclusively to foreign venues.
Selig acknowledged that incumbents and established market participants often resist novel instruments, but he emphasized that regulatory engagement can reduce systemic and consumer risks. He stated: "It's time to approve regulated futures contracts that have no expiration date," and stressed the CFTC's commitment to ensuring these products are available while being well regulated in the United States. This reflects a broader regulatory stance: where new trading instruments gain traction globally, domestic regulators may choose to permit them under a framework designed to protect market integrity and participants.
The practical backdrop to Selig's comments was the CFTC's late-May approval allowing prediction market platform Kalshi to list bitcoin perpetual futures. Perps are futures contracts without a set expiration date that let traders speculate on price movements without taking delivery of the underlying asset. While popular in overseas digital-asset markets, this authorization marked the first time perps were permitted in the U.S. Kalshi has since expanded its offerings to include perps on additional cryptocurrencies.
Early market demand has been strong. Kalshi reported that its perps reached more than $3 billion in notional volume in just over a week of beta testing, illustrating substantial retail and institutional interest. That same momentum has drawn criticism from some established futures market operators. For example, CME Group CEO Terrence Duffy publicly criticized the approval shortly after it was announced, arguing that the high leverage often associated with perpetuals can produce significant risk for market participants.
Selig pushed back on such criticisms during his interview. He rejected the idea that regulators should be "paternalistic" by blocking access to certain products because they appear complex or risky, noting that many existing instruments — such as options — also involve sophisticated mechanics and significant risk. He emphasized that proper regulatory responses include clear disclosure and that intermediaries (brokers and exchanges) must perform suitability assessments and other controls to ensure customers trading these markets are appropriately evaluated. In other words, access paired with oversight and transparency, rather than prohibition, is his stated approach.
Addressing questions about leverage specifically, Kalshi's CEO Tarek Mansour previously said the platform's maximum leverage for perps is roughly six times, which Mansour pointed out is lower than leverage available on some CME-listed futures. Selig used this context to further argue that product design choices and exchange-level risk controls matter and can mitigate some of the concerns critics have raised about leverage and consumer exposure.
Finally, Selig denied that political influence motivated the approval. Questions arose because Donald Trump Jr. serves as a strategic advisor to Kalshi and because of broader political dynamics at the time of the decision. Selig called suggestions of political pressure "absolutely absurd" and maintained that the commission's action reflected regulatory judgment rather than political interference.
This key insight significantly impacts the understanding of the decision: permitting perps under a domestic, regulated framework aims to reduce offshore regulatory arbitrage and improve transparency, while relying on disclosure, suitability checks, and exchange risk controls to manage consumer and systemic risk.
Key Insights Table
| Aspect | Description |
|---|---|
| Regulatory Rationale | Onshoring perps lets the CFTC apply U.S. rules and oversight to a product popular abroad, aiming to reduce regulatory arbitrage. |
| Product Characteristics | Perpetual futures have no expiration date and allow speculation without owning the underlying asset. |
| Market Reaction | High initial demand reported by platforms such as Kalshi, with substantial notional volumes during beta testing. |
| Risk Concerns | Critics cite leverage and complexity; proponents emphasize disclosure, suitability, and exchange risk controls to mitigate these risks. |
| Political Questions | Claims of political influence were denied by the CFTC; the chair described such insinuations as baseless. |
Afterwards...
Looking ahead, there are several areas of technology and regulatory practice worth further exploration to ensure these markets evolve safely. Continued development of robust surveillance tools and automated risk-management systems at exchanges can help monitor leverage and abnormal trading patterns in real time. Enhanced standardized disclosure frameworks and consumer-education initiatives will be important so that retail participants understand the mechanics and risks of perps and other derivatives.
Advances in margining models, stress-testing frameworks, and cross-market interoperability standards should be pursued to reduce systemic vulnerabilities that could arise as new instruments proliferate. Additionally, collaboration between domestic and international regulators can improve consistency in rules and reduce opportunities for regulatory arbitrage. Finally, ongoing empirical study of market outcomes — including liquidity, volatility, and default events — will inform whether the regulatory framework and market practices effectively balance innovation with investor protection.
These forward-looking measures can help align market innovation with stability and consumer protection as perps and other novel derivatives become part of the U.S. market landscape.