CFTC Wants Perpetual Futures Back Onshore — and It Might Actually Happen

Perpetual futures are the most traded instrument in crypto. They are also, in the United States, essentially illegal.

That contradiction has defined the American derivatives market for years. Perps — leveraged contracts that let traders hold positions indefinitely without expiration — generate over $100 billion in daily volume globally. Binance, Bybit, OKX, and a constellation of offshore platforms facilitate the vast majority of it. American traders participate anyway, routing through VPNs and non-KYC platforms. The CFTC knows this. Everyone knows this.

Now, Chairman Michael Selig wants to end the charade.

The Announcement

Speaking at the Milken Institute's Future of Finance conference in early March, Selig said the CFTC would create a regulatory framework for perpetual futures contracts "within weeks." The agency will establish rules covering leverage limits, margin requirements, liquidation procedures, and clearing mechanisms for contracts that, by design, never expire.

This is not the first time a regulator has discussed bringing perps onshore. It is the first time one has attached a timeline.

The move follows Selig's broader "Project Crypto" initiative, announced in January, which declared that "regulation by enforcement is dead" and positioned the CFTC as the primary regulator for digital commodity derivatives. The perpetual futures framework is the most concrete policy action to emerge from that initiative so far.

Why Perps Matter

For anyone unfamiliar: a perpetual futures contract is a derivative that tracks the price of an underlying asset — Bitcoin, Ethereum, whatever — and allows traders to take leveraged long or short positions without an expiry date. Unlike traditional futures that settle monthly or quarterly, perps use a funding rate mechanism to keep the contract price tethered to the spot price.

They dominate crypto trading for a reason. Perps offer leverage that spot markets cannot. They allow short selling without borrowing the underlying asset. They provide price discovery in a market that trades 24/7. On most days, perpetual futures volume exceeds spot volume by a factor of three to five.

The problem: this entire market has developed outside the United States. After the CFTC sued BitMEX in 2020 and Binance in 2023, the message to offshore platforms was clear — serve American customers at your own risk. The platforms responded by implementing IP blocks and KYC checks that were trivially easy to circumvent. American traders migrated to VPNs. The volume went offshore. The CFTC's enforcement actions didn't reduce American participation in perps markets — they just pushed it beyond the reach of American regulation.

The Offshore Problem

The scale of the offshore migration is staggering. By current estimates, more than 85% of global crypto derivatives volume occurs on platforms with no US regulatory oversight. These platforms set their own leverage limits — 100x or higher on some venues — their own liquidation rules, and their own standards for market manipulation prevention.

When a whale manipulates the price on a thin offshore order book and triggers a cascade of liquidations, there is no regulator to investigate. When a platform goes down during a volatility spike and users cannot close positions, there is no recourse. When customer funds are commingled with exchange operating capital — the exact structure that destroyed FTX — there is no audit requirement that would catch it.

The CFTC's current approach has produced the worst possible outcome: American traders are participating in a massive leveraged market with zero consumer protection.

What Onshore Perps Would Look Like

The emerging framework, based on Selig's public statements and CFTC staff discussions, is expected to address several key areas.

Leverage limits. The CFTC is unlikely to permit the 50x–100x leverage available on offshore platforms. Expect initial limits in the range of 5x–20x, consistent with existing futures margin requirements and recent proposals for retail crypto leverage.

Clearing and settlement. Traditional futures clear through central counterparties like CME Clearing. Perpetual futures will need an equivalent mechanism — a clearing structure that can handle 24/7 trading, continuous funding rate settlements, and the absence of a fixed expiry date.

Liquidation procedures. Offshore platforms use auto-deleveraging systems that can liquidate positions instantly during volatility spikes, often at prices far worse than the bankruptcy price. A regulated framework would likely require more orderly liquidation mechanisms and insurance fund minimums.

Market surveillance. Regulated exchanges would be subject to the same market manipulation and wash trading rules that apply to traditional commodity futures. This alone would represent a fundamental change from the offshore status quo.

Who Benefits

The obvious winners are CME Group and Coinbase Derivatives — the two US-regulated platforms best positioned to list perpetual contracts. CME already dominates regulated Bitcoin and Ethereum futures. Adding perps to its product suite would capture a segment of the market it has never been able to access. Coinbase has been building its derivatives infrastructure for over a year, and CEO Brian Armstrong has publicly lobbied for onshore perps regulation.

The less obvious winner is the American trader who currently uses offshore platforms. Moving to a regulated venue means lower leverage — but it also means segregated customer funds, transparent pricing, and the knowledge that the platform won't vanish overnight with your deposits.

Who Loses

Offshore platforms lose their monopoly on American perp traders. Binance, Bybit, and OKX have built multi-billion dollar businesses partly on the back of American demand that technically shouldn't be on their platforms. A credible onshore alternative with reasonable leverage and institutional-grade infrastructure would siphon volume from these venues.

DeFi perpetual protocols — dYdX, Hyperliquid, GMX — face a more ambiguous future. Selig's January speech included references to enabling derivatives "across both centralized and decentralized markets," but the practical mechanics of regulating a permissionless smart contract remain unresolved. The CFTC has indicated it will provide safe harbors for software developers and non-custodial wallets, but the line between a decentralized protocol and a regulated exchange is one that no jurisdiction has convincingly drawn.

The Bigger Picture

The perps framework is part of a broader regulatory realignment. The SEC-CFTC joint guidance issued on March 17 classified Bitcoin and 15 other crypto assets as digital commodities, giving the CFTC clear jurisdiction over their derivatives markets. The GENIUS Act has been signed into law. The enforcement-first era under previous CFTC and SEC leadership has formally ended.

What's replacing it is still taking shape. But the direction is clear: the United States is moving from a posture of prohibition to one of regulated inclusion. Rather than banning instruments that traders will use regardless, the CFTC is building a framework to bring them under supervision.

Whether that framework arrives in weeks, as Selig suggested, or months, as regulatory timelines typically demand, is an open question. What is no longer open is the policy direction. The world's largest derivatives market is coming to the world's most important financial jurisdiction.

The only question left is how much volume the offshore platforms lose when it does.