CME Plans to Sue the CFTC Over Its Perpetual Futures Approval as a Michigan Judge Rebuffs the Agency on Prediction Markets - Unchained

CME Group intends to sue the Commodity Futures Trading Commission over its approval of perpetual futures earlier this month, CEO Terrence Duffy told CNBC on Wednesday, putting the largest US derivatives exchange in direct conflict with its own regulator.

Duffy argued the CFTC‘s approval of Kalshi‘s perpetual futures did not meet the Dodd-Frank Act’s requirements for swaps. “Under the Dodd-Frank Act, it clearly defines what a swap is and what a future is, and when there’s two parties exchanging payments to each other, that’s deemed a swap,” he said, contending that the products approved as futures are actually swaps subject to different requirements. Duffy, who steps down next year, said CME would need to understand “the rules of the road” before listing perpetual contracts of its own, and said he believed “to an extent” that the agency was misrepresenting facts, pointing to a CFTC release on 24/7 trading that he said was described as a rule when it was not.

This story is an excerpt from the Unchained Daily newsletter.

Subscribe here to get these updates in your email for free

The threat landed the same day the agency absorbed a blow on a different front. A US District Court judge in the Western District of Michigan, Paul L. Maloney, denied Polymarket‘s request for a preliminary injunction against Michigan regulators and ruled that sports-related prediction-market wagers are not swaps and therefore fall outside CFTC jurisdiction. Maloney said Polymarket was unlikely to succeed on the merits, writing that the agency’s view of derivatives was “so vast that it would encompass vast swaths of activity never understood to be associated with the financial industry” and traditionally left to the states.

Together, the developments cut at the foundation of the CFTC’s recent expansion under the Trump administration, which has leaned on the Dodd-Frank Act to claim authority over both crypto perpetuals and prediction markets, opening the door to US perps with approvals at Kalshi and Coinbase and suing several states that tried to restrict them. With Sixth Circuit courts now split, two siding with states and one with prediction markets, the appeals court is set to take up the question next month, with the Supreme Court the likely final arbiter.

Related Listen: What Two DOJ Cases Reveal About the Legal Risks of Prediction Markets: Bits + Bips