SEC Reportedly Backs CFTC Against Stock-Perps Injunction

The Securities and Exchange Commission (SEC) has filed a court brief supporting the Commodity Futures Trading Commission (CFTC) in a lawsuit over perpetual futures on individual U.S. stocks, The Block reported on Nov. 11. Unchained has not reviewed the SEC’s filing.
Perpetual futures, or perps, are leveraged derivatives with no expiry date. Applications from Coinbase, Kalshi and Bitnomial, which is owned by Kraken parent Payward, to offer single-stock perps were deemed approved by the CFTC on Nov. 2 after its review window lapsed. The Capital Markets Alliance, a trade group whose members include Cboe and Citadel Securities, then sued the CFTC in the U.S. District Court for the Southern District of New York, arguing the contracts are security-based swaps, which the SEC oversees, rather than futures, which fall under the CFTC. Coinbase, Kalshi and Payward, joined by DRW Holdings, Jump Trading and Paradigm, have since filed their own brief backing the CFTC.

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The SEC’s Position
The SEC’s brief reportedly rejects the alliance’s portrayal of the CFTC as acting on its own, pointing out that the SEC reviews the CFTC’s rule changes and that the two agencies work together on single-stock perps. The Block quoted the agency as calling that depiction, of “a CFTC gone rogue” and an absent SEC, mistaken.
Why the SEC’s Brief Matters
The SEC opposed the injunction but did not take a position on whether the contracts are futures or swaps, Ledger Insights reported, and gave no hint of how it will decide, by its Dec. 31 deadline, whether to overturn the exchanges’ rules. The filing also puts the agency’s current leadership and two of its former senior officials on opposite sides of the same case.
Former SEC Officials Join the Other Side
On Nov. 10, the investor advocacy group Better Markets asked the court to accept a friend-of-the-court brief backing the alliance’s request for a preliminary injunction. Two former senior SEC officials signed on: Allison Herren Lee, a former acting chair and commissioner, and John C. Coates, a Harvard Law School professor and former SEC general counsel.
Dominick Freda, legal director at Better Markets, said in a statement that the CFTC was “attempting to gut 90 years of investor protections on behalf of Kalshi, Coinbase and others.” He argued that, despite the futures label, the contracts are securities swaps and belong under SEC rules.
Freda called the products “shadow stocks” and put their leverage at about six times, saying “an investor’s entire portfolio can be zeroed out with just a 16% movement in the market.”
Related Listen: Why a Single Word Will Decide Who Can Trade Perps in the U.S

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