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Classification question remains unsettled
In a comment letter filed with both regulators, the group said that cash-settled equity perpetuals carrying the established characteristics of futures contracts should be eligible for classification as security futures, a category jointly overseen by the SEC and CFTC. The filing responds to a joint request for comment from the two agencies on how U.S. law should define swaps, security-based swaps and products that may fall outside those categories.
For a product trading hundreds of billions in volume, perpetual contracts still do not have a settled answer to the most basic question under U.S. law: are they futures, or are they swaps? One federal judge described the exercise as deciding whether tetrahedrons belong in a particular geometric category.
Under the proposal, regulators would first look at the structure of a derivative and how it trades to decide whether it is a future or a swap. The asset referenced by the contract would then determine how regulatory authority is divided between the SEC and CFTC. A perpetual contract on Bitcoin, crude oil or an individual stock should therefore receive the same initial product classification when each instrument has the same futures-like characteristics.
Equity perps could qualify as security futures
At the center of the position is the structure of a perpetual contract, which has no predetermined expiration date but uses recurring funding payments to keep its price close to the asset it tracks. When a contract trades above its reference price, long-position holders pay shorts. If the contract falls below the reference price, shorts pay longs. This mechanism creates a continuous incentive for the perpetual price to converge toward the underlying market.
The group cited features that courts and regulators have historically used when examining futures contracts, including standardized terms, fungibility, fixed unit quantities and the ability to close a position through an offsetting trade. On Hyperliquid's HIP-3 markets, positions open and close through a central limit order book, margin is maintained continuously, and contract prices are publicly available.
The lack of an expiry date does not automatically prevent futures classification, according to the filing. The group cited federal court decisions finding that a specified future delivery or settlement date is not always required and that contracts of indefinite duration can still carry the futurity associated with a futures contract.
CFTC approval set precedent with Kalshi Bitcoin perp
U.S. regulators have already applied that reasoning to crypto perpetuals. In May, the CFTC approved Kalshi's Bitcoin perp as the first federally regulated Bitcoin perpetual futures contract in the United States. The May 29 approval classified BTCPERP as a futures contract even though it has no fixed expiration date. Kalshi began offering the contract in June and subsequently expanded its regulated perpetual lineup to other cryptocurrencies.
The CFTC said additional products would remain subject to review, leaving the treatment of contracts referencing other asset classes open to further regulatory analysis. The CFTC took a different approach than in past enforcement cases, where it treated some perpetual products as swaps without determining whether the instruments qualified for the statutory exclusion covering futures contracts.
Disagreement over that interpretation has already reached federal court. CME Group filed a legal challenge over perps, arguing that products such as Kalshi's contract should fall under the swaps framework instead of being treated as ordinary futures. The SEC also used the term perpetual futures in its case related to the Mango Markets exploit while disputing that the products were futures contracts offered under regulated futures rules.
HIP-3 volume puts $480 billion behind the debate
The filing ties the regulatory request to trading activity already taking place through Hyperliquid's HIP-3 framework, where independent market operators known as deployers can create their own perpetual markets. The protocol handles matching, clearing and settlement while deployers choose market parameters and list assets not available through Hyperliquid's original validator-operated markets.
The $480 billion in cumulative notional volume over 10 months provides scale behind the argument that perpetual contracts need a clear regulatory classification rather than continued ambiguity. The group wants regulators to keep perpetual contract classification consistent across asset types while preserving exchange listing flexibility, so that a contract on a single stock qualifying as a future would fall into the security futures category and come under both agencies.
