Terry Duffy, CME Group's chairman and CEO, says Kalshi's perpetual oil futures are swaps, not futures, and that the CFTC approved them in error.
Duffy says CME is litigating against the CFTC and its chair, and he expects a court to settle the classification question soon.
Duffy says offshore DeFi oil perpetuals carry extraordinary leverage and settle defaults by tearing up winning trades, while the Commodity Markets Council wants the CFTC to crack down on VPN access.
CME's Duffy says perpetual oil futures are really swaps
CME is fighting Kalshi's perpetual oil futures on the ground that perpetuals are swaps, and the CFTC wrongly approved them as futures. Duffy says the label decides tax, margin and registration rules, so it affects investors directly. He says the objection is about product structure and risk, not competition, and a court is expected to settle it soon.
Takeaways
Perpetual products are swaps, not futures. Duffy says perpetuals have no expiry and track spot through a funding rate that longs and shorts pay each other. That structure makes them swaps, and he says the CFTC approved them as futures in error.
Classification changes investor obligations. Swaps carry different requirements from futures, including tax treatment, margin rules and registration. Duffy says investors using these products need clarity on what they are and what they are not.
CME is suing the CFTC and expects a ruling. Duffy says CME is litigating against the CFTC and its chair, Selig, over the classification. He expects a court to decide the question very shortly. He says he would make the same argument about Bitcoin.
Duffy rejects the franchise-protection charge. Fu argues CME objects because Kalshi is coming for oil. Duffy says the objection is structural. He notes 40 to 50 percent of oil trades involve calendar spreads, and 94 percent of CME's business is institutional.
Perpetuals are retail speculation with no natural counterparties. Duffy says Kalshi's perpetuals are strictly retail-focused, have no natural buyer or seller and exist only for speculation. He sees them as unlike CME's institutional hedging and spread business.
Offshore DeFi perpetuals carry cascade risk. Duffy says offshore oil perpetuals run on extraordinary leverage, with automatic liquidations that can cascade. Defaults are settled by tearing up the winning side of a trade, with no waterfall. He sees no effect on CME price discovery yet.
VPN access to offshore venues is unpoliced. Binance and Hyperliquid already trade oil perpetuals in volume. Duffy says US traders should not reach them by VPN, yet no one polices it. He leaves any crackdown to government and does not know what it would look like.
CME's 24-7 oil contract
CME proposed a 24-7 oil contract sized at 10 barrels.
Fu says the CFTC was an obstacle to listing it.
Duffy talked with commercial participants, who did not think the contract was worth listing.
He then pulled the proposal.
He asks why US participants may trade offshore perpetuals while CME may not offer its 24-7 contract.
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