The Securities and Exchange Commission filed an amicus brief this week to support the Commodity Futures Trading Commission against a lawsuit from the Capital Markets Alliance. The CMA, an industry group including Cboe and Citadel Securities, sued last week to overturn CFTC approval of perpetual derivatives on individual stocks. They argued the agency violated the Administrative Procedure Act because such products fall under SEC jurisdiction. The CMA also claimed the CFTC failed to explain its decision and asked the court to "vacate the approvals."
A defensive stand for coordination
The SEC rejected the CMA’s characterization that the CFTC has "gone rogue." In the brief, the agency stated it collaborates often with the CFTC, which is vital when overseeing equity perpetuals. It noted that CFTC rule changes are subject to SEC review, making the depiction of a missing regulator mistaken. This legal maneuver highlights the complex overlap between federal agencies managing financial instruments. The SEC emphasized that its involvement ensures proper oversight rather than abdication of duty. By stepping in, the commission signals that inter-agency cooperation remains central to regulating these new market structures.
Competing views on product classification
A joint amicus brief from crypto firms including Coinbase, Kraken parent Payward, Kalshi, DRW Holdings, Paradigm, and Jump Trading opposes the CMA. Three of those firms, Coinbase, Kalshi, and Payward, submitted applications with the CFTC to list equity perps tied to U.S. stocks, and the applications were deemed approved on Nov. 2. Conversely, Better Markets and former SEC Commissioner Allison Herren Lee argue these products should be regulated by the SEC. Better Markets described them as "securities swaps" that pose an unreasonably high risk of causing total losses to retail investors. They pointed out that similar financial products contributed to the 2008 crash. This dispute centers on whether the instruments function as futures or securities swaps, a distinction that determines which agency holds regulatory authority and what investor protections apply.
