Terry Duffy, chief executive of CME Group, told attendees at the Global Exchange & Fintech conference hosted by Piper Sandler that U.S. approval of perpetual cryptocurrency futures is creating a systemic vulnerability for markets.
Speaking on Thursday, Duffy accused the Commodity Futures Trading Commission of short-circuiting its standard review for what the agency has called a "novel and complex" instrument. He warned that the products, commonly known as perpetual futures or "perps," carry exceptionally high risk because of their leverage profiles and the liquidation mechanisms used in the market.
"It is a disaster waiting to happen," Duffy said. "I believe the market has been supplanted by the speculation market, and that does not suit anyone’s interest."
Last month, cryptocurrency exchange Coinbase and prediction market operator Kalshi said they would begin offering perpetual crypto futures to U.S. investors after receiving CFTC approval. That marked a first for domestic, regulated exchanges in the United States, which had not previously listed such instruments for local participation.
Perpetual futures differ from standard listed futures in that they do not have a set expiration date. Traders can hold positions indefinitely without rolling contracts. The structure also permits very high levels of leverage - the article notes that leverage on such products can be as much as 50-to-1 - which allows market participants to magnify exposure to moves in the underlying crypto prices.
Duffy focused on two features he sees as especially dangerous: the degree of leverage available to many traders, and the automatic liquidation systems that dominate the market for such products. He expressed particular concern for retail investors, warning they may not understand how ongoing funding-rate costs can erode positions over time.
A CFTC spokesperson did not immediately respond to a request for comment. The agency has said it will consider perpetual futures approvals on a case-by-case basis.
Market action around the decision has already affected incumbent exchanges. The article notes that shares of Intercontinental Exchange, CME Group, and Cboe Global Markets experienced a selloff over the week amid investor concern that the CFTC decision could produce a new, sustained competitive threat for traditional bourses. At the same time, Kalshi and Coinbase saw market moves associated with their announcements about listing perps.
Duffy pushed back against the notion that the new products will meaningfully displace standard institutional futures business. He said that 85% to 90% of CME's activity is driven by institutional participants and that, in his view, perpetual futures are not a practical substitute for instruments designed to meet institutional needs. He added that analysts do not expect perps to significantly affect traditional futures volumes at exchanges that serve institutional clients.
Beyond competitive concerns, Duffy returned to process and prudence. He criticized the agency's approval pathway for bypassing what he described as a traditional "full review" when treating the instrument as novel and complex. For Duffy, that procedural choice compounds the market-structure risks inherent in the products themselves.
Context and implications
- Perpetual futures are a new type of listed derivative for U.S. investors on regulated exchanges, notable for the lack of expirations and for permitting very high leverage.
- Duffy's comments focus on two core vulnerabilities: extreme leverage and automated liquidation models, which he believes could disproportionately harm retail traders.
- The announcement that Coinbase and Kalshi will offer perps after CFTC sign-off has coincided with short-term share price reactions among established exchange operators, though Duffy argued that institutional demand for perps is limited.
Note: This article reports statements and market reactions as described. It does not include a regulatory response beyond the CFTC's stated approach to approvals on a case-by-case basis, for which the agency had not provided an immediate comment.