Judge Lets Stock Perpetuals Keep Trading but Doubts CFTC’s Authority

Perpetual derivatives tied to individual U.S. stocks can keep trading on Kalshi, Coinbase Derivatives and Bitnomial for now after U.S. District Judge Valerie Caproni in Manhattan refused a Wall Street trade group’s request for a temporary restraining order, according to the court’s Nov. 3 order.

The same order found the group likely to win its central argument: that the Commodity Futures Trading Commission had no statutory authority to approve the products for retail investors on platforms it regulates.

Caproni’s findings

The contracts “do not appear to satisfy the definition of a security future,” Caproni wrote, because they do not provide for “a sale for future delivery of a single security.” Instead, she said, they appear to meet the definition of a swap, which is regulated by the Securities and Exchange Commission rather than the CFTC.

She also found that the balance of equities and the public interest favored the plaintiff, writing that the CFTC’s actions “seem to represent a major disruption to the equities market.”

The request failed on irreparable harm. Caproni said the declarations filed by the plaintiff were “conjectural” about the harm its members would suffer and did not show harm that was “actual and imminent.” Bloomberg Law reported that the judge signaled she might ultimately side with the firms opposed to the products.

A same-day lawsuit

The Capital Markets Alliance Association sued the CFTC and Chairman Michael Selig on Nov. 3, the docket shows. Court filings include declarations from Cboe, Citadel Securities and Healthy Markets, and Bitcoin Magazine reported that all three are members of the alliance.

Selig said in a Nov. 3 statement that the contracts were deemed approved as security futures products under Commission Regulation 40.3 and could begin trading that day, RG.org reported. By Wednesday morning, Kalshi was listing perpetuals on Qualcomm, McDonald’s, Amgen and Costco, according to Bitcoin Magazine and RG.org.

A CFTC spokesperson called the lawsuit “troubling” and told Reuters that markets “should be governed by law, not litigation campaigns intended to block innovation,” Bitcoin Magazine reported.

Briefing on a longer injunction

The alliance has also asked for a preliminary injunction. Under the order, the CFTC’s response is due Friday, Nov. 6, and the alliance’s reply is due Tuesday, Nov. 10. The schedule may be changed by the district judge assigned to the case.

Sources: U.S. District Court for the Southern District of New York (Capital Markets Alliance Association v. CFTC, No. 1:26-cv-09608), Bloomberg Law, Bitcoin Magazine, RG.org.