CME argues that criminals are harmful to its futures products in the long term. The lawsuit alleges that the CFTC failed to consider the ramifications of approving the bad actors, and that these products are actually “swaps” as defined by the Dodd-Frank Act, and not “futures.”
Each term carries implications for how the products themselves should be regulated and what the requirements are for the companies that issue them. CME CEO Terrence Duffy, who recently announced he will step down next year, told CNBC last week that the distinction requires different rules for participants.
“The CFTC did not engage in its own analysis of whether its approval of Kalshi’s Bitcoin perpetual as a future is consistent with the law,” CME’s lawsuit says. “The CFTC did not even mention the relevant Dodd-Frank provision defining ‘swap.’ In fact, the word ‘swap’ does not appear anywhere in the Order.”
Instead, the CFTC simply “approved Kalshi’s application,” the lawsuit claims.
What’s interesting is that the real picture of companies obtaining Designated Contracts Market (DCM) approvals and becoming offenders is growing quite rapidly. The same day the CFTC accepted Kalshi’s request, it sent a no-action letter to Coinbase, apparently opening the door for that exchange to also list the bad guys, albeit through an offshore intermediary.
