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ARBBetter Markets backs lawsuit against CFTC over single-stock perpetual futures
Better Markets and two former SEC officials have filed a brief arguing that perpetual futures on individual US stocks are security-based swaps that should fall under SEC rules, not CFTC-approved futures.
Why it matters: The case will decide whether US retail traders can access leveraged perpetual futures on individual stocks, and which regulator, the CFTC or the SEC, oversees them.
Key points
- Better Markets filed an amicus brief supporting the Capital Markets Alliance's challenge to the CFTC's approval of perpetual derivatives on individual US stocks.
- The brief was filed by former SEC Commissioner Allison Herren Lee and former SEC General Counsel John C. Coates.
- Better Markets says roughly six-to-one leverage means a 16% move could wipe out an investor's entire portfolio.
Better Markets has filed a friend-of-the-court brief backing a lawsuit against the CFTC over its approval of single-stock perpetual futures, Bitcoin.com News reports. The organisation argues that these products are security-based swaps rather than futures because they have no fixed delivery date. On that basis, it says they fall under SEC jurisdiction and Dodd-Frank Act protections, including registration and trading only on regulated national securities exchanges.
The brief was filed by Allison Herren Lee, a former SEC Acting Chair and Commissioner, and John C. Coates, a former SEC General Counsel and Harvard Law professor. Better Markets warned that the products carry roughly six-to-one leverage, so a 16% move in the underlying stock could zero out an investor's portfolio. It added that automatic liquidation can wipe investors out within minutes, including overnight.
Retail risk warning
The filing supports the Capital Markets Alliance, whose members include Cboe Global Markets, Citadel Securities and the Healthy Markets Association. The CMA wants the approvals vacated and the products recognised as security-based swaps, which would bar the CFTC from approving them while the case is pending. It argues the agency has long treated perpetual derivatives as swaps and has not explained its change of approach.
The SEC has already filed its own amicus brief supporting the CFTC's rule changes and disputing the CMA's claim that the agency is "going rogue". The CFTC is also in dispute with state regulators over prediction markets.
What to watch: The court must rule on the Capital Markets Alliance's request to vacate the CFTC's approvals while the case is pending.
Live updates on NewsFeeds:RegulationDesk editor: Keshav Aggarwal (accountable for this page; this summary was not edited by hand)
How this was produced: an AI model wrote this summary of Bitcoin.com News’s report, which we credit and link above. Read our Editorial and AI policy. Spotted a mistake? See Corrections.
Not investment advice. Read the risk disclaimer.