U.S. regulators initiate a review of rules for crypto derivatives amid conflict with CME
The U.S. Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have announced a joint request for public comment on the definitions of swaps and other derivative instruments. This move aims to clarify the regulatory framework for new financial products, including contracts on prediction markets and perpetual futures. The regulators seek to assess how well current rules align with the rapidly changing market structure.
This initiative comes amid an escalating conflict with the Chicago Mercantile Exchange (CME Group). On June 17, CME CEO Terrence Duffy stated his intention to file a lawsuit against the CFTC. The reason was the agency's approval for the Kalshi platform to launch perpetual futures, which CME considers a violation of existing rules.
CFTC Chairman Michael Selig emphasized that revising the rules would help eliminate the uncertainty embedded in the Dodd-Frank Act, which hinders fair competition. His SEC counterpart, Paul Atkins, added that clarifying the rules for event contracts is long overdue. The comment collection period will last 60 days.
A CFTC representative has already called the CME lawsuit "unfounded" and accused the exchange of attempting to slow progress through the courts. According to him, dominant players are simply afraid of competition on a level playing field. Representatives of the decentralized exchange Hyperliquid have also joined the criticism. The Hyperliquid Policy Center stated that CME controls approximately 92% of the U.S. derivatives market and is trying to maintain its monopoly.
"Americans have been going offshore for years to trade perpetual futures. This is the first truly new product on the regulated U.S. market in a decade. Competition benefits users, and innovation deserves clear rules," the organization noted.
It is worth recalling that in May, the CFTC already admitted its lawsuit against Gemini was erroneous, stating that the methods of the previous leadership were "improper." This precedent underscores the current trend toward revising the regulatory approach.
As an analyst, I believe this step by regulators is a belated but necessary response to decades of regulatory uncertainty. If the CFTC and SEC can develop clear and balanced rules for perpetual futures and prediction market contracts, it will not only reduce risks for investors but also bring a significant portion of trading volume back to the U.S. from offshore jurisdictions. However, the key challenge will remain balancing the promotion of innovation with protection against monopolistic practices, as seen in the case of CME.