CME's swap argument faces a second test as Kalshi files equity perpetual

CME Group filed suit against the CFTC in federal court after the Commission approved Kalshi's bitcoin perpetual futures contract in May — a product CME argues is legally a swap, not a future, and should therefore face the more demanding regulatory architecture that governs swaps. That argument is still unresolved. On August 18, Kalshi submitted a second perpetual contract to the CFTC for voluntary product approval: a never-expiring future tied to US large-cap equities, specifically the MerQube US Large Cap Index, with a one-dollar multiplier per index point and continuous trading through the weekend session.

The CME lawsuit now has more at stake than it did in May.

The classification question — future or swap — is not semantic. The Commodity Exchange Act treats the two differently in ways that touch margin, reporting, clearing, and the identity of the entities permitted to offer them. Kalshi's position is that a contract with no expiration date but with standardised size, central clearing through Kalshi Klear, and daily funding settlement is simply a futures contract with a novel settlement mechanic. CME's position is that daily funding payments are what define a swap economically, regardless of what the exchange calls the product. The CFTC approved the bitcoin perpetual on Kalshi's theory. CME went to court.

What Kalshi has done with the US500 filing is extend that approved theory into equity markets before the court has ruled on whether the theory holds. If CME prevails and the bitcoin perpetual is reclassified, every subsequent perpetual filing rests on a foundation that a federal court will have rejected. If the CFTC and Kalshi prevail, a product structure that was functionally unavailable on US-regulated exchanges — perpetual futures originated almost entirely offshore — becomes a domestic offering across asset classes. The bitcoin perpetual drew more than five billion dollars in trading volume in its first two weeks. An equity perpetual tracking five hundred large-cap US companies would face a different and substantially larger addressable market.

The MerQube index choice matters. The S&P 500 carries licensing arrangements that impose costs and constraints. MerQube administers an independently constructed float-weighted benchmark of the five hundred largest US-listed companies. The construction is similar; the licensor is not the same. That is a legal and commercial decision wrapped in a single index selection.

I have seen derivative product filings used to lock in regulatory interpretations before a challenge resolves — to create facts on the ground that make reversal more disruptive than continuation. I do not think the US500 filing is merely an expansion. It is a hedge against the scenario in which the court rules narrowly on bitcoin specifically, leaving the structural question open for subsequent products. A ruling that addresses only the bitcoin perpetual leaves Kalshi free to argue that the equity perpetual was separately approved. Whether the CFTC will set a review timeline before the CME case produces an opinion is the question that determines whether that hedge pays.

The Commodity Exchange Act, at 7 U.S.C. § 1a, defines a swap by reference to its economic character — not its label — and the definition includes agreements providing for payment based on the value of a financial index. How a federal court reads that definition against a contract with daily funding payments indexed to equity prices is what resolves this.