In May the Commodity Futures Trading Commission approved a bitcoin perpetual contract, submitted by Kalshi, to be listed and cleared as a futures contract. CME has since challenged the approval in federal court, arguing the product is a swap and belongs under stricter rules. On 2 September the Commission moved to dismiss, arguing that CME lacks standing and, on the merits, in the words reported from its filing, that "perpetual futures are futures."
So the question in circulation is a definitional one. Future or swap.
The order itself is less interested in that question than the litigation suggests, and more interesting on another. It runs to nine pages. Most of it recounts the exchange's own analysis. The Commission's finding on classification is three sentences. What follows those three sentences explains why this contract works, and ends by saying exactly where the approval stops.
The spot market did.
1 What The Commission Actually Found
The legal standard is permissive. Under the Commodity Exchange Act the Commission shall approve a contract submitted for review unless it finds that the contract violates the Act. What it found is that listing this one as a futures contract "would not violate the CEA or the Commission's regulations thereunder."
The basis is stated plainly: "This finding is based on the Commission's review of Kalshi's analysis of the categorization." That analysis is the familiar one. A standardized unit, obligations guaranteed through a clearing house that sets margin, exit by offset, trading "in the contract," and a line of cases, including the Seventh Circuit in CME v. SEC, holding that a contract of indefinite duration can still be a future.
We want to be precise here, because an argument has started to circulate that overreads the order. The spot market is not the classification test. The next sentence says the finding is "additionally informed by certain characteristics of the bitcoin spot market." Additionally. The order does not say liquidity makes a perpetual a future. It says liquidity is why this one works, and that is a different claim with a different consequence.
2 Why A Perpetual Needs The Market Next Door
The order's own explanation is the clearest short account of a perpetual we have read from a regulator.
A dated future converges because of expiry: "at expiry of the futures contract, the potential obligation to make or take delivery, or make a payment based on the settlement reference price, incentivizes the futures contract's price to converge to the spot market price." A perpetual never expires, so it uses funding. Long and short holders exchange periodic payments based on the gap between the contract and a reference price that tracks spot, and whichever side is trading away from spot pays for it.
That only works if the reference can be trusted at the moment payments are calculated, and the order names three conditions. Bitcoin's spot market trades around the clock across broadly distributed venues, so the reference is continuously observable rather than stale. It is deep, so the reference "cannot be changed at a relatively low cost." And it never closes, so arbitrageurs can act while the contract trades.
The failure case is spelled out. "If the spot market were thinly traded, a market participant holding a large position in the contract would need to spend relatively little to move the spot market price at the moment the settlement payment is calculated and thus receive larger settlement payments on the large position." Without continuous spot trading, "price dislocations could grow, triggering liquidations or leading to settlement at distorted levels before the spot market reopens."
A dated future carries its anchor inside the contract. A perpetual borrows it from the market next door. Whatever condition that market is in on the day, the contract inherits.
3 Framework · Where The Approval Ends
Then comes the limiting sentence, which is the part of the order worth reading twice: "the analysis in this Order is, therefore, limited to the BTCPERP Contract and similarly structured perpetual contracts that reference the spot price of bitcoin or other digital commodities that have deep, active, and continuous spot market trading. This analysis does not extend to underlying asset classes other than digital commodities."
Read together with its footnotes, the order draws this map.
| Underlying | What the order says | Where that leaves it |
|---|---|---|
| Bitcoin | Spot trading is deep, broadly distributed, active and continuous | Approved on Kalshi. Other designated contract markets may list it |
| Other digital commodities with deep, active and continuous spot trading | Within the analysis | Each contract still assessed on its own submission |
| Digital commodities whose spot trading is thin or intermittent | Outside the stated conditions | Not covered by this analysis |
| Equity securities and narrow based indexes | Named in a footnote | Would benefit from review by the CFTC and the SEC |
| Agricultural products | Named in a footnote | "Likely particularly ill-suited" |
None of this prohibits anything. The order says only that its analysis does not reach the lower rows, and it invites anyone who wants to list perpetuals on other asset classes to engage with staff. What the map does is tell you where the next approval will be argued. Not on bitcoin. On the second and third rows.
4 Two Lines Drawn Outside The Contract
The boundary of this approval is set by two things, and neither is in the contract.
The first is a market condition. Deep, active and continuous describe how a spot market trades, not what an asset is, and markets change. The order does not say how deep is deep, who measures it, or when it is measured again. It says the Commission expects in future to address perpetual contracts more generally, and that "the presence, or absence, of continually available spot price data" may be relevant. Until then the line is a description in an order, not a number in a rule.
The second is a definition that belongs to someone else. The order's reach is confined to digital commodities, and footnote 23 gives that term "the meaning assigned to it" in joint SEC and CFTC guidance on the application of the securities laws to crypto assets, published in the Federal Register on 23 March. It is the same interpretation our seventh paper built on. The category that decides whether a perpetual falls inside a CFTC approval is fixed in a document the CFTC does not control alone.
We argued in July that the binding constraint in this area is no longer the definitions but who holds the pen. This is the same argument at the scale of a single product. The reach of a CFTC approval now depends on an SEC definition, and on a condition in a market neither agency runs.
And the category is not a label. The operative paragraph directs that customer positions, and the collateral margining them, "shall be held in the futures account" at both the futures commission merchant and the clearing organization. Segregation, customer protection and the clearing path all follow from the classification. If the category moves, they move with it.
5 The Other Side
Four arguments cut against this note.
It may be ordinary drafting. Confining an order to its facts is how the Commission writes approvals, and a limiting sentence is not a standard. We would accept that reading if the conditions were generic. They are not. The order explains at length, with a failure case, why these particular conditions let a funding mechanism work, and then limits itself to assets that meet them. That reads as the Commission telling the next applicant what it will ask.
It is not new. Regulators have always looked at spot markets when judging a contract: deliverable supply, position limits, susceptibility to manipulation. That is right. What is new is the direction of dependence. A dated future leans on spot at one moment, expiry. A perpetual leans on it continuously, which is why continuity sits beside depth in the limiting sentence.
The court may never reach it. According to reporting, the Commission's first argument is that CME lacks standing, and TD Cowen's Jaret Seiberg has suggested the court may never decide whether perpetuals are futures or swaps. If the case ends on standing, the boundary is never tested in court and will be redrawn administratively by whoever holds the Commission next. That is a political line as much as a market one, and we would not argue otherwise.
And for bitcoin it is academic. Bitcoin's spot market is not about to become thin. Agreed. The boundary does not bind the first contract. It binds the second, the third, and every digital commodity whose spot market is real but shallower, which describes most of them.
6 What Would Settle It
- Whether the Commission approves, conditions or declines a perpetual on a digital commodity with a thinner spot market, and whether spot depth is named in its reasons.
- Whether the promised general treatment of perpetual contracts puts a number on deep, active and continuous. A threshold would turn a description into a rule and make the boundary measurable.
- How the court disposes of CME's challenge. A ruling on standing alone leaves the boundary untested. A ruling on the merits tests the classification, and probably still not the scope.
- Whether perpetuals on equities arrive through joint review with the SEC, as the footnote suggests they should.
- Whether the March guidance's definition of a digital commodity is revised. That would move the edge of a CFTC approval without the CFTC doing anything at all.
If the next approval cites spot depth, the line this order drew will have become the test in practice without becoming one on paper. If the next approval turns on other grounds, the limiting sentence will have been what a cautious lawyer would call it, a sentence confining an order to its facts.
7 Sources
The order is quoted from the primary document. Retrieval 11 September 2026.
- CFTC, Order approving KalshiEX LLC BTCPERP futures contract, 29 May 2026. The submission of 28 May under section 5c(c)(4) and Regulation 40.3, the contract terms, the exchange's categorization analysis, the legal standard, the finding and its "additionally informed" basis, the convergence and funding explanation, the three spot market conditions and the failure case, the limiting sentence, footnotes 22 to 25, and the operative paragraph on futures account treatment.
- American Banker, CFTC asks judge to toss CME challenge to Kalshi perps, 3 September 2026. The 2 September motion to dismiss, the standing argument, the reported quotation from the filing, CME's position that the contract is a swap, and the comment from TD Cowen.
- SEC and CFTC, Application of the federal securities laws to certain types of crypto assets and certain transactions involving crypto assets, 91 Fed. Reg. 13,714, 23 March 2026, as cited in footnote 23 of the order.
- OX85, Who enforces the rules?, July 2026, and Who decides it is over?, August 2026.
On sourcing, and on what we did not use. The Commission's filing in the CME case is quoted as reported by American Banker; we did not read the filing itself. An amicus brief filed on 9 September on behalf of the Hyperliquid Policy Center was reported but not read here, and figures attributed to it about the size of the global perpetual market are not used. Reports that the Singapore Exchange obtained authorization to give US institutions direct access to its perpetuals under the Commission's foreign board of trade rules rest on an interview with the exchange and could not be confirmed in a Commission document; trading has not begun, and we leave that route for a later note. A case number, a judge and a response deadline circulating in secondary coverage were not confirmed and are not used. We identify the March guidance by the title and citation given in the order.
This note is published for informational purposes and does not constitute investment, legal or tax advice. It describes an approval order that is subject to pending litigation and to future Commission action on perpetual contracts. Figures and quoted language are as of the dates stated.