CME is seeking to overturn the CFTC's approval of perpetual futures in federal court.
US traders could face unexpected tax consequences from perpetual futures contracts if courts or regulators eventually determine the products should be classified as swaps instead of futures, despite their recent approval by the CFTC, CME Group CEO Terry Duffy said in a recent interview with CoinDesk.
The warning comes as CME challenges the regulator’s approval of perpetual futures in federal court.
Duffy argued that the contracts’ periodic funding payments meet the legal definition of swaps under US law. That distinction could materially affect taxation, as futures generally qualify for the blended 60/40 capital gains treatment under Section 1256, while swaps are typically subject to ordinary income tax rules.
Because the IRS has not issued guidance specifically covering perpetual futures, traders could face uncertainty if the legal classification changes after tax returns have already been filed.
Tax specialists said the legal outcome is uncertain because perpetual futures combine the structural elements of swaps with the economic function of futures.
Experts also said any court decision may not fully resolve the issue, as the IRS is not required to follow the CFTC’s classification and could issue separate guidance on the tax treatment of perpetual futures, leaving institutional investors with ongoing regulatory uncertainty.
