A long-standing adage in trading circles warns against building positions that keep you up at night. Perpetual futures, known colloquially as perps, were designed with precisely the opposite intent in mind.

These blockchain-based instruments, which trade around the clock and never expire, are expanding rapidly in offshore markets. The legal challenge to their classification as "futures" has been mounted by CME Group, yet the market's growth shows no signs of slowing. Within just two days, CME Group, Cboe Global Markets, ICE, and MIAX collectively lost US$18 billion in market value, while perps nearly stole the spotlight from the largest IPO in history.

On Wednesday, President Trump signalled that the Commodity Futures Trading Commission may be preparing a regulatory framework for Hyperliquid, the leading decentralised perps trading platform. This development suggests Wall Street's approach may need to shift from resistance toward adoption.

Put simply, a perpetual contract is a bet that never matures. It can track nearly any asset class, trades 24 hours a day, and supports substantial leverage.

Where the pressure builds

Investors worry that perps could upend the traditional exchange business model. A significant revenue stream in conventional derivatives markets comes from position rolling, where traders sell expiring near-month contracts and buy longer-dated ones to maintain exposure. Perpetual contracts have no expiry date, eliminating the need to roll positions and stripping exchanges of this lucrative income. Currently, US-approved perps trading is limited to cryptocurrencies, but the President's comments this week suggest compliant perpetual contracts on traditional assets such as equities and commodities may soon become reality. Trading volumes for perps on traditional assets have already surged on Hyperliquid this year.

"The profitability logic of traditional exchanges is being called into question," said a current director at a listed exchange who requested anonymity. "Perpetual futures, the expansion of zero-day options, extended trading hours — these are all products of intensifying market competition. Investors want to trade whenever they please."

Brokers and exchanges have been extending trading hours for years. TD Ameritrade, now under Schwab's umbrella, pioneered 24-hour trading five days a week back in 2018. The London Stock Exchange will follow suit next year. Most brokers, along with Cboe, now support around-the-clock trading for major securities like index options, except on weekends. Monthly options gave way to weekly options, then zero-days-to-expiry options, expanding the trading cycle from within. Perpetual contracts, born in the crypto market where 24/7 accessibility is a core appeal, appear to be the natural next step in this evolution.

Yet many investors and observers harbour concerns about the product's inherent high leverage and the controversies and risks that accompany it.

Prediction market platform Kalshi, along with centralised crypto exchanges like Coinbase and Binance, have brought perps into the mainstream. The dominant force in this emerging space, however, is the decentralised platform Hyperliquid. The platform has built its own settlement blockchain and operates HyperliquidXYZ alongside Trade [XYZ], an international decentralised exchange that has become synonymous with perpetual contracts. According to data compiled by executives at Hyperliquid Strategies, a listed treasury company investing in the platform's underlying token, Hyperliquid's nominal trading volume approached US$200 billion last month.

Will Wall Street embrace the trend fully?

In March, Trade [XYZ] secured an exclusive licence from S&P Dow Jones Indices to launch perpetual derivatives tracking the benchmark S&P 500 index. In May, the CFTC approved Bitcoin perpetual futures, making Kalshi the first US platform to legally operate perps. News of the approval sent shares of established exchanges tumbling.

While retail investors dominate perps participation, institutional money is steadily flowing in.

"Retail remains the primary driver, but institutions are starting to engage," said Ram Vital, chief executive of market maker Marex, whose shares have gained more than 80% this year. Marex conducts perpetual futures business across various underlying assets globally and has launched crypto perpetual contracts in London. Vital added: "As long as client demand exists, Marex is willing to expand related products on US compliant platforms, regardless of the underlying asset."

Hyperliquid's perps platform arguably represents one of the most compelling real-world applications of blockchain to date. Trading on the platform is powered by the HYPE token, whose value derives in part from a share of trading fee revenue. HYPE has risen 196% this year and is a core holding in S&P's new Pantera Digital Asset Index, which tracks crypto projects with revenue-generating capabilities.

Hyperliquid's growth has been striking, with average daily nominal trading volume reaching US$9.6 billion in June. Established institutions are already positioning themselves with similar products. Robinhood has introduced crypto perps for its European clients, while Cboe launched "continuous futures" with durations of up to 120 months late last year.

Even Terry Duffy, chairman and chief executive of CME Group, who has been among the most vocal critics of perpetual futures, acknowledged on the latest earnings call that CME "has prepared contract specifications and can launch these products at any time should market demand and industry structure warrant it." He added, however: "No clients have approached us with such a request yet."

Several exchange executives speaking privately have revealed that the selloff in exchange stocks has left management in Chicago and New York perplexed, particularly at Cboe. At Cboe, options are positioned as risk management tools rather than speculative instruments. Contract expiry is a core design feature, not a flaw, helping investors of all sizes define their risk boundaries. Exchange data shows that even in the zero-day options market, over 90% of trades have risk limits in place.

"If the goal is to replace options with perpetual contracts, I believe that path leads nowhere," said Rob Hocking, Cboe's global head of derivatives, in an interview. "Zero-day options offer asymmetric returns — theoretically unlimited upside, but the maximum loss is limited to the premium paid."

Nasdaq holds a similar view. But Nasdaq and ICE, parent of the New York Stock Exchange, face another challenge: how will IPO and listing businesses evolve when private companies can obtain ample liquidity and price discovery online?

SpaceX is planning to list on Nasdaq with a valuation of US$1.8 trillion. During the IPO preparation phase, SpaceX perpetual contracts on Hyperliquid drew significant attention. On listing day, more than 7 million SpaceX perps changed hands, with nominal value of US$1.2 billion, and the perpetual contract trading price was nearly identical to the stock's initial public offering price of US$150. Patrick Morley, senior analyst at Piper Sandler, noted that trading volumes in equity perpetual contracts for companies like SpaceX and SK Hynix have exploded this year, driven by the real-world asset trading boom, with TradeXYZ's total trading volume approaching US$500 billion.

"A major appeal of perpetual contracts is 24-hour trading," said Stephen O'Connor, vice president of US options analysis and product innovation at Nasdaq. "But genuinely effective price discovery still depends on the liquidity our on-exchange markets provide."

CME's legal challenge to curb perps

The foremost question regarding how perps will reshape existing market architecture is product classification. In June, CME's Duffy sued the regulator over the CFTC's approval of Kalshi's Bitcoin perpetual futures, arguing the product should be classified as a swap rather than a future.

"We do not take this matter lightly," Duffy said on the eve of filing the lawsuit.

The litigation represents a pivotal legal battle for the category: swaps and futures are subject to vastly different regulatory regimes, which directly determine the margin, risk capital, and tax requirements for issuers and trading institutions. The CFTC has called the lawsuit baseless.

The case will also have profound implications for the ETF industry. Issuers have long relied on the swaps market to structure customised products, fuelling the boom in leveraged ETFs. If issuers switch to perpetual contracts, they could lower their own costs while squeezing the revenue of bank-affiliated swap dealers.

The Commodity Exchange Act of 1936 defines a future as "a contract for the future sale of a commodity." Perpetual contracts, which never settle and have no expiry date, conflict with this traditional definition. The Dodd-Frank Act of 2010 drew a clear distinction: a product classified as a future cannot also be a swap. If perps were reclassified as swaps, platforms like Kalshi and Polymarket, which operate their own clearing houses, would face considerably stricter capital requirements.

"We disagree with the swap classification," responded Diana Elizabeth, Kalshi's head of communications, via email. "CME's lawsuit is not rooted in legal merit but in fear of competition. Perpetual contracts require only a single fee payment and can be closed at any time, ultimately delivering a cheaper and simpler product to end users."

The CFTC declined to comment on the lawsuit.

Substantial overall trading volumes

Regardless of whether perps are ultimately classified as futures or swaps, one thing is beyond doubt: the audience for perpetual contracts is large enough to command Wall Street's full attention. Kalshi's perps trading volume surpassed US$20 billion in the first month of launch. The company has already filed for gold, silver, and platinum perpetual contracts, with more categories to follow.

Compiled data shows that combined average daily nominal trading volume for perps on centralised and decentralised platforms this year stands at approximately US$150 billion, down from a peak of nearly US$200 billion per day last year. Perpetual contracts lack standardised specifications, making direct comparison with traditional futures and options markets difficult; S&P 500 options typically see daily nominal trading volume of US$2–3 trillion.

CoinDesk data analysis reveals that Hyperliquid's total protocol revenue peaked at US$357 million last year, declining to US$200 million last quarter as blockchain developers created new trading markets and diverted a share of fees. Cboe's quarterly revenue exceeded US$700 million, up 25% year over year.

One potential industry trajectory: convergence between established exchanges and crypto platforms issuing perpetual contracts.

In March, ICE, parent of the New York Stock Exchange, announced a US$200 million investment in crypto exchange OKX. The two formed a joint venture called OKXICE, with each holding 50% equity at a valuation of US$25 billion, to issue tokenised equities and crypto futures. OKX currently offers perpetual contracts on the seven major technology stocks, classifying them as swap products.

Similarly, Deutsche Börse Group, operator of Eurex, partnered with Kraken last year and increased its investment by US$200 million into Payward, Kraken's operating entity. Kraken has launched multiple perpetual contract products with leverage of up to 50 times.

"Since the birth of financial futures in the 1970s, the futures industry may be entering its most exciting phase yet," said a senior executive at a major futures clearing house, speaking anonymously to avoid comments being construed as criticism of regulators. "Competition drives new products and lowers trading costs, and the CFTC is attempting to accommodate these innovative players. Product definitions need to be clarified, as some current business activities do sit at the regulatory boundary."