The US Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) have issued a joint request for public comment. The regulators want to update and clarify the definitions of a number of derivatives, and this is happening against the backdrop of the CME exchange's lawsuit against the CFTC.
The request covers a wide range of topics, including the definitions of «swaps» and «security-based swaps», as well as what does not fall under these concepts. Separately, the regulators ask to assess how to treat new products — in particular, event contracts on prediction markets and perpetual futures.
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What the regulators want to clarify
CFTC Chairman Michael Selig said the request offers a chance to remove long-standing ambiguities in Title VII of the Dodd-Frank Act. According to him, it was precisely these ambiguities that hindered fair competition and open innovation. This part of the law gives the CFTC the right to regulate swaps — with the exception of those based on securities.
SEC Chairman Paul Atkins also called the clarification of a number of definitions «long overdue». He separately mentioned situational products — that is, contracts tied to the issuance of specific securities.
For the market, this is an important step. Clearer rules would help to understand which norms new products such as perpetual futures should operate under, products that until now have remained in a regulatory gray zone in the US.
The essence of the dispute between CME and CFTC
The tension was triggered by the lawsuit that CME Group filed against the CFTC. The reason is the regulator's decision to allow the Kalshi platform to trade perpetual futures (perps) and classify them as futures contracts.
In the lawsuit CME claims that, in approving the perps, CFTC Chairman Michael Selig ignored the existing definition of a «swap» and bypassed the proper regulatory procedure. In CME's view, these products should be regulated specifically as swaps. CME Group Chairman Terrence Duffy earlier told CNBC that perpetual futures belong to swaps.
Source: BeInCrypto
