Kalshi’s crypto perpetuals spark debate over whether they’re futures or swaps

Latest developments: Kalshi’s launch of CFTC-regulated crypto perpetuals has reignited a long-running debate over financial market definitions.

• John Lothian and Kalshi's Udesh Jha joined The Policy Protocol to debate this topic.
• John Lothian, publisher of John Lothian News, argued that perpetual contracts resemble swaps because they involve recurring bilateral cash-flow payments through funding-rate mechanisms.
• Udesh Jha, Kalshi’s head of exchange analytics, countered that perpetuals function like futures because they are exchange-traded, centrally cleared and designed to track underlying spot markets.
• The debate follows the recent approval and launch of crypto perpetuals on Kalshi under CFTC oversight.

The disagreement: Both sides view the same product through different regulatory lenses.

• Lothian said perpetuals differ from traditional futures because funding-rate payments create ongoing cash flows between market participants, a feature he associates with swaps.
• Jha argued that funding rates merely make financing costs explicit rather than embedding them in futures prices, making perpetuals a more efficient version of existing futures markets.
• According to Jha, perpetuals also eliminate the need for traders to roll positions into new contract months, reducing friction and costs.

Why it matters: The classification could determine who can access the products and under what rules.

• Lothian noted that labeling perpetuals as swaps could require different regulatory treatment and potentially limit retail participation unless Congress or regulators create new frameworks.
• Jha said bringing perpetual trading onshore gives U.S. customers access to a product that already generates trillions of dollars in offshore volume while providing stronger protections and oversight.
• The outcome could influence customer protections, market structure, tax treatment and competitive dynamics between U.S. and offshore crypto venues.

The complication: Concerns about market manipulation remain unresolved.

• Lothian warned that funding-rate calculation windows could create incentives for traders to influence prices around settlement periods, potentially affecting large positions.
• He cited concerns raised by market participants about the susceptibility of perpetual-style contracts to manipulation.
• Jha responded that Kalshi calculates funding rates continuously throughout funding cycles rather than relying on a single closing period, which he said reduces manipulation risks.

What comes next: The debate is unlikely to end with Kalshi’s launch.

• Lothian argued regulators should carefully preserve longstanding distinctions between futures and swaps.
• Jha maintained that existing regulatory principles already support treating perpetuals as futures and that additional market education is needed.
• As U.S. crypto derivatives markets expand, regulators and industry participants will continue testing whether traditional legal definitions fit new products.