TD Cowen says CME has the upper hand in lawsuit against CFTC over crypto perpetual futures

CME Group has the stronger legal case in its lawsuit challenging the U.S. Commodity Futures Trading Commission's approval of crypto perpetual futures, with both procedural and substantive arguments in its favor, according to investment bank TD Cowen.

The world's largest derivatives exchange sued the CFTC on Thursday after the agency recently approved crypto perpetual futures, or "perps," in the U.S. for Kalshi and Coinbase. CME argues that the Commodity Exchange Act requires a futures contract to involve delivery, or the equivalent, at a set time in the future. Because perpetual futures do not expire, CME contends they should instead be regulated as swaps.

"We believe CME has the upper hand in the litigation," Jaret Seiberg, managing director at TD Cowen's Washington Research Group, said in a note. "We expect CME will seek a preliminary injunction to block perps as the case proceeds." A preliminary injunction is a temporary court order that pauses an action while a lawsuit is ongoing.

'Case hinges on definition of swaps'

Seiberg said the dispute is likely to come down to whether a product that never expires, such as a perp, can legally qualify as a futures contract. The distinction matters because swaps and futures are subject to different regulatory and tax rules. Swap dealers face registration requirements and five-day margin rules, while futures generally have one-day margin requirements and receive tax advantages that swaps do not, Seiberg noted.

Seiberg also said CME's Administrative Procedure Act arguments appear strong. The CFTC had previously treated perpetual contracts as swaps and sought public comment on the issue in April 2025, but ultimately approved Kalshi's bitcoin perpetual futures in a single day without issuing a regulation, Seiberg noted. He said Kalshi's application relied on case law that predates Congress creating a regulatory framework for swaps and argued the approval may violate the Administrative Procedure Act because the CFTC did not engage in independent decision-making or adequately explain why it classified the product as a futures contract rather than a swap.

CME is asking the court to vacate the CFTC's approval and declare that similar perpetual contracts should be regulated as swaps.

Seiberg expects a status conference and litigation schedule to be set soon. The injunction request and the court's timeline will be the key developments to watch, according to Seiberg.

A CFTC spokesperson has pushed back against the CME lawsuit, saying, "Rather than compete in the marketplace, the CME has decided to undertake lawfare against the agency and the Trump Administration’s pro-innovation agenda," and that the agency looks forward to addressing CME's claims and dismissing the "frivolous lawsuit."

A Kalshi spokesperson has said, "This isn't about the law, it's about the fear of competition." Coinbase, whose U.S. customers can access its global perpetual products through an affiliate, has reportedly backed the CFTC's approach, saying competition and innovation benefit U.S. markets.

Following the lawsuit, the CFTC and Securities and Exchange Commission jointly requested public feedback on updating and clarifying derivatives rules. The request covers topics including the definitions of "swaps" and "security-based swaps," the scope of existing exemptions, and how newer products such as prediction market event contracts and perpetual futures should be treated.