On November 9, the SEC filed a brief in Manhattan court in support of the CFTC. The agency is asking the judge not to halt trading in perpetual futures on US stocks. The lawsuit against the CFTC was filed by Cboe and Citadel Securities, so now both regulators are against them.
What this instrument is. A perpetual future is a leveraged contract with no expiration date. It does not provide for future delivery of the stock. The SEC is responsible for the US securities market, the CFTC for the derivatives market.
Why this matters to a trader. The outcome of the case determines where a US retail trader gets leverage on individual stocks: on CFTC venues or on exchanges under SEC supervision.
How much is already being traded?
Trading is underway while the agencies argue in court.
- about 50 US stocks and exchange-traded funds - Kalshi contracts available since November 5
- $375 million - daily notional volume on the second day, according to Cboe's count
- more than 100 contracts - that many in total were filed in September by Coinbase Derivatives, Kalshi and Bitnomial
What is the dispute about?
- The CFTC's decision. On November 3, the regulator allowed perpetual futures to be listed for trading as futures on securities.
- The alliance's lawsuit. That same day, the Capital Markets Alliance Association, which includes the Cboe exchange and the market maker Citadel Securities, went to court. According to its version, these are security-based swaps, and only the SEC approves those.
- The SEC's brief. The agency called the picture of a "deranged CFTC and a vanished SEC" mistaken. It recalled that exchange rules for these products still go through its review, and cited a memorandum of joint work with the CFTC signed in March.
- The main point was not addressed. The SEC never answered whether these are futures or swaps. The alliance pointed this out in its November 10 response.
What did the court decide?
Judge Valerie Caproni on November 3 found the alliance's arguments about the CFTC exceeding its authority to be plausible. She wrote that the regulator's actions "look like a serious disruption of the stock market's operation."
- No emergency ban - Cboe, Citadel Securities and Healthy Markets described possible rather than probable harm
- The case is with Judge Lorna Schofield - document exchange on the preliminary injunction closed on November 10
- Deadline until December 31 - during this time the SEC can revoke the exchanges' rules
What does this mean for a trader?
Key point: the contracts are already trading, but the court will determine where a US retail trader gets leverage on individual stocks - on CFTC venues or on exchanges under SEC supervision.
Access to leverage is decided by the regulator, while in prop trading the account notional is provided by the company. How this works is covered in the academy, and the calculator helps you pick a challenge for stocks and indices.
What notional gives you leverage on stocks?
While the agencies sort out jurisdiction, the retail trader's question is a down-to-earth one: what volume can they even work with in stocks and indices. With a deposit of a couple thousand dollars, a 3% move in an individual stock brings in sixty dollars. The permitted leverage hardly changes that. In prop trading the notional is provided by the company: you pay for selection under its rules, trade its account and keep an agreed share of the profit. No injunction hearing has been scheduled yet, so there is time to study the scheme calmly.