The Capital Markets Alliance argues that perpetual derivatives tied to individual stocks fall under SEC jurisdiction rather than the CFTC's authority.
The Capital Markets Alliance, an industry group backed by Cboe and Citadel Securities, filed a federal lawsuit Tuesday challenging the Commodity Futures Trading Commission’s approval of perpetual derivatives tied to individual US stocks.
The lawsuit, filed in the US District Court for the Southern District of New York, seeks to overturn the approvals and prevent the CFTC from allowing the contracts to trade while the case proceeds.
The group argues that the products qualify as security based swaps, placing them under the Securities and Exchange Commission’s exclusive jurisdiction.
It also claims the CFTC violated the Administrative Procedure Act by failing to explain its decision or adequately consider the impact on investors and securities markets.
“The hasty roll out of financial products that circumvent well established regulatory frameworks erodes investor protection and undermines the integrity and resiliency of the American financial system,” said Adam Ford, secretary of the Capital Markets Alliance.
CFTC defends approval of stock perpetual futures
The lawsuit follows a Tuesday announcement from CFTC Chairman Michael Selig allowing perpetual futures on individual US stocks to begin trading on qualifying regulated exchanges.
Selig said the contracts were approved as security futures under the Commodity Futures Modernization Act of 2000, making them subject to oversight by both the CFTC and SEC.
The products allow traders to gain leveraged exposure to individual stocks without holding the underlying shares or facing the expiration dates associated with traditional futures contracts.
The CFTC said bringing the products onto regulated US exchanges would provide investors with an alternative to offshore trading platforms.
A CFTC spokesperson called the lawsuit a troubling attempt to interfere with regulated markets, Reuters reported.
The dispute follows a separate lawsuit filed by CME Group in June challenging the CFTC’s approval of crypto perpetual futures offered by Kalshi and Coinbase.
