CME’s Duffy presses CFTC on unresolved tax status of US perpetual futures
CME Group chief warns unresolved tax rules for CFTC-approved crypto perpetual futures could deter institutional trading, as legal challenge proceeds.
Terry Duffy, chief executive of CME Group, has told markets that an unresolved question of tax law could undermine America’s fledgling market in regulated crypto perpetual futures before it properly begins. In remarks on 22 July, Duffy argued that the Commodity Futures Trading Commission approved these products without first settling how gains from them ought to be taxed — a gap he says leaves institutional traders exposed and unwilling to participate.
The dispute centres on Section 1256 of the US tax code, which affords traditional futures contracts a blended rate: 60% of gains taxed as long-term capital gains and 40% as short-term, irrespective of holding period. Perpetual futures, which carry no expiry date or delivery mechanism and instead use a funding rate to track the underlying spot price, sit awkwardly within that framework. Duffy’s contention is that their structure resembles a swap far more than a conventional futures contract — and swaps do not qualify for the favourable Section 1256 treatment, with gains instead taxed as ordinary income.
A lawsuit already before the courts
CME Group’s objections are not confined to public commentary. The exchange filed a lawsuit against the CFTC in June 2026 challenging the regulator’s approval of Kalshi’s Bitcoin perpetual futures contract, granted the previous month and marking the first CFTC-regulated Bitcoin perpetual product to trade in the United States. The suit alleges procedural discrepancies in how that approval was reached, and effectively argues the regulator moved ahead of a product category that does not fit comfortably within existing rules on margin, retail protections and tax reporting.
Duffy noted that 94% of CME’s own trading volume comes from institutional clients, and said those clients have shown no appetite for perpetual futures while the tax treatment remains unsettled. Tax advisers, he suggested, cannot offer firm guidance on reporting obligations for an instrument whose legal classification is being actively contested in court.
Institutional caution meets regulatory experimentation
The episode illustrates a wider tension running through Washington’s approach to crypto derivatives this year. Bringing perpetual futures onshore under CFTC oversight has been billed as one of 2026’s more consequential regulatory experiments, promising US-regulated access to a product that has long dominated offshore crypto trading. Yet the framework inherited by regulators was built for contracts with fixed expiries and clear tax treatment, not instruments designed to run indefinitely.
Other trading venues are reportedly pursuing similar authorisations, meaning the tax question Duffy has raised will not remain confined to Kalshi’s product. For European and UK institutions watching the US market from the outside, the standoff is a reminder that regulatory approval alone does not guarantee institutional uptake; without clarity from tax authorities, compliance and treasury teams at large trading firms are unlikely to commit meaningful capital.
CME keeps its own options open
Despite its legal challenge, CME has signalled it is prepared to launch its own perpetual futures contracts should client demand emerge. That positioning suggests the exchange’s quarrel is less with the existence of the product than with the sequencing of its approval — Duffy appears to want tax and margin questions resolved before, rather than after, a product goes live.
For now, the litigation continues, the CFTC has not clarified how perpetual futures will be treated under Section 1256, and market participants weighing regulated US perps face the same uncertainty Duffy has put on record: a product cleared for trading, but not yet cleared for tax purposes.
Read more: DRW’s Don Wilson tells regulators perpetual futures risk is a design choice, not a flaw
