By Anirban Sen and Pritam Biswas
June 4 (Reuters) - CME Group CEO Terry Duffy warned on Thursday that U.S. regulators are creating systemic risk by allowing perpetual cryptocurrency futures, and criticized
the Commodity Futures Trading Commission's process for approving the novel products.
Speaking at the Global Exchange & Fintech conference hosted by Piper Sandler, Duffy said the CFTC’s approval of "perps," futures products that typically carry large amounts of leverage, was extremely risky for the financial system.
"It is a disaster waiting to happen," Duffy said. "I believe the market has been supplanted by the speculation market, and that does not suit anyone’s interest."
Cryptocurrency exchange Coinbase and prediction market platform Kalshi last month said they would launch perpetual crypto futures after the CFTC gave them the green light, marking the first time such instruments will be available to U.S. investors through domestic, regulated exchanges.
Perpetual futures, or "perps," are listed derivatives without an expiration date, allowing traders to maintain positions indefinitely without the need to roll over contracts. The products also permit high degrees of leverage — often as much as 50-to-1 — enabling investors to amplify their exposure to market moves.
Duffy warned that this extreme leverage, combined with the automatic liquidation models prevalent in the sector, poses a significant threat to retail investors who may not fully grasp the corrosive effects of funding rate costs on their positions.
A CFTC spokesperson did not immediately respond to a request for comment. The agency has said it will approve the products on a case-by-case basis.
CME, CBOE and New York Stock Exchange parent Intercontinental Exchange have been hit by a share selloff this week as investors fret that the CFTC's decision creates a major new competitive threat for the incumbent bourses in the long term.
Duffy dismissed those fears, however, noting that institutional demand for the risky products remains limited. He said 85% to 90% of the CME's business is institutionally driven and that analysts do not expect perps to have a meaningful impact on traditional futures products, as they are not a viable alternative to instruments designed for institutions.
Duffy also criticized the CFTC's approval process as hasty, saying it bypassed a traditional "full review" for what it deemed a "novel and complex" instrument.
(Reporting by Pritam Biswas in Bengaluru and Anirban Sen in New York; Editing by Michelle Price and Matthew Lewis)
