The US Securities and Exchange Commission has told a New York court not to stop trading in single-stock perpetual futures launched by Kalshi, Coinbase and Bitnomial, siding with the Commodity Futures Trading Commission against an injunction request from the Capital Markets Alliance.

At the same time, the SEC stopped short of saying whether the products are legally futures or swaps. That unanswered question sits at the center of the lawsuit, which argues the contracts should fall under SEC oversight rather than the CFTC.

Dispute follows launch of US stock perps

Single-stock perpetual futures began trading in the United States last week after the CFTC allowed the 45-day review period on applications from Kalshi, Coinbase and Bitnomial to expire without blocking them.

The Capital Markets Alliance, which represents Cboe, Citadel Securities and the Healthy Markets Association, then sued the CFTC in New York seeking to halt the products. Its case argues that the contracts are swaps, not futures, and therefore belong under the SEC’s regulatory framework.

Judge denied emergency relief

A judge previously declined to grant an emergency order stopping the contracts from trading. Even so, the court indicated that the alliance was likely to succeed on the legal question, according to the source article.

Briefing on the injunction has now concluded, with the SEC joining the case. That filing gave the agency a chance to address the alliance’s criticism of how the products were allowed to reach the market.

SEC supports the CFTC, but avoids the core classification issue

In its brief, the SEC backed the CFTC’s position that an injunction should not be issued. The agency also pushed back on the alliance’s characterization of the dispute as involving a “CFTC gone rogue, and an SEC gone missing.”

However, the SEC did not tell the court whether it believes the perpetual contracts are futures or swaps. That omission is notable because the classification issue is the central legal dispute in the case and would help determine which regulator has primary authority over the instruments.

Agency points to its own powers

Rather than resolve the classification question, the SEC emphasized that it still has authority relating to the contracts. The brief outlined the agency’s powers over the perpetual products and said the alliance lacks standing to sue, echoing the CFTC’s argument on that point.

One of those powers is the ability to decide whether to overturn exchange rules adopted by Kalshi, Coinbase and Bitnomial in connection with the products. The SEC said it has until December 31 to make that decision.

What comes next

The SEC’s filing offered no signal about how it may act by that deadline. For now, the agency’s position is limited to opposing a court order that would immediately halt the products while preserving its ability to intervene through its own process later this year.

That leaves the market with two unresolved tracks: the court fight over whether the contracts are lawful under the existing regulatory split, and the SEC’s separate decision on whether to overturn the exchanges’ rules by December 31.

Source: www.ledgerinsights.com