SEC Backs CFTC in Court Fight Over Stock Perpetuals

The US Securities and Exchange Commission has filed a brief in federal court backing the CFTC in a dispute over perpetual contracts on individual stocks, The Block and Law360 reported on Nov. 11.

Details

The Capital Markets Alliance, a trade group whose members include firms tied to Cboe and Citadel Securities, sued to overturn the CFTC's approval, which the agency announced on Nov. 3. It argues the CFTC violated the Administrative Procedure Act and that the products belong under SEC jurisdiction. The case is in the Southern District of New York.

In its filing, the SEC said the lawsuit's portrayal of "a CFTC gone rogue, and an SEC gone missing" is mistaken, according to The Block.

Industry firms are also on the CFTC's side. Coinbase, Kraken parent Payward, Kalshi, DRW Holdings, Paradigm and Jump Trading filed a joint brief. Per Markets Media, they note that by the plaintiffs' own count nearly $700 billion in stock perpetuals traded in August, none of it under US rules.

Better Markets and former SEC Commissioner Allison Herren Lee filed opposing briefs, arguing the products are security-based swaps that the SEC should regulate, with strong protections for retail investors.

What this means for the market

The SEC's filing shows the two agencies presenting a joint front on the approval, which the plaintiffs had framed as a CFTC overreach. The court has not ruled, and no US exchange has launched these contracts yet. For background on the approval itself, see our Nov. 3 report. Live bitcoin price is in the daily brief.