The US Securities and Exchange Commission (SEC) has filed a brief in a New York federal district court supporting the Commodity Futures Trading Commission’s (CFTC) approval of perpetual futures on individual stocks, Japanese outlet CoinPost reported on November 12. According to the report, the SEC said an industry association’s portrayal of an absent SEC is wrong. The exact date of the filing was not given.
The lawsuit
The Capital Markets Alliance, whose members include Cboe and Citadel Securities, sued on November 3 to have the approval revoked, according to CoinPost. The group reportedly argues that the CFTC acted alone and that perpetual futures, which have no expiry date, are security-based swaps regulated only by the SEC.
The approval itself was announced on November 3 by CFTC chairman Selig. It allows CFTC-designated exchanges that handle securities futures and are also registered with the SEC to begin trading perpetual futures on individual stocks for the first time.
Companies defend the approval
On November 9, six companies, including Coinbase, Kalshi and Payward, the parent of Kraken, reportedly asked the court for leave to file a brief defending the approval. They argue that perpetual futures are single-stock futures jointly overseen by the CFTC and the SEC under the framework Congress set in 2000, and are not swaps.
According to the report, the companies also argue that reclassifying the products as security-based swaps would shut US retail investors out, because the SEC has not yet set up a framework for retail exchange trading.
What the court has said so far
On November 3 the district court denied the association’s request for an emergency injunction, so the approval stays in effect while the case continues. However, CoinPost reports that the court gave a preliminary view that perpetual futures appear not to meet the definition of a securities future and appear to fit the definition of a swap. That view is not a ruling on the merits.
Reports cited by CoinPost also say that CME and Better Markets have filed briefs.
Open questions
Several points remain unclear: when the SEC filed its brief, which side CME and Better Markets support, whether the court will grant the six companies leave to file, and when a ruling on the merits might come. The account rests on a single source, CoinPost.
Sources
- coinpost.jp CoinPost — 米SEC、個別株の無期限先物訴訟に参加 CFTCを支持 Accessed
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