Author: David Christopher, Bankless

Translation: Deep Tide TechFlow

Deep Tide Overview: The U.S. Securities and Exchange Commission (SEC) has officially expressed support for the Commodity Futures Trading Commission (CFTC) in jointly addressing the lawsuit filed by the Capital Markets Alliance (CMA), supported by Cboe and Citadel Securities. This alliance previously attempted to overturn the CFTC's decision to approve the listing of single U.S. stock perpetual futures on November 2.

With the two regulatory agencies working together to defend the approval results, the U.S. stock perpetual contracts launched by Kalshi, Coinbase, and Bitnomial have gained more solid compliance support in the short term. However, the presiding judge previously expressed concerns regarding the legal classification of perpetual contracts, and the SEC must make a final ruling before December 31.

As both major financial regulatory agencies in the U.S. now stand up to defend the approval decision, the U.S. stock perpetual contracts launched by Kalshi, Coinbase, and Bitnomial appear to be safer; however, a judge had previously expressed doubts about this.

The SEC has expressed support for the CFTC in the fight against the Capital Markets Alliance (CMA). This alliance, supported by Cboe and Citadel Securities, is suing to overturn the CFTC's decision to approve a single U.S. stock perpetual futures on November 2.

Core Dynamics of the Event

· Regulatory Briefing: According to The Block, the SEC believes that the alliance’s portrayal of the situation as “CFTC out of control, SEC absent” is incorrect.

The SEC stated that the rules set by the relevant exchanges for these contracts still need to go through the SEC's own review process and agreed with the CFTC's stance that the alliance lacks the standing to file a lawsuit.

It is worth noting that the SEC has not clearly defined whether perpetual contracts fall under futures or swaps, as it must decide by December 31 whether to overturn these exchange rules.

· Controversial Focus: The alliance argues that perpetual contracts cannot be considered “security futures” jointly regulated by the CFTC and SEC, but essentially fall under the “security-based swaps” solely regulated by the SEC, which are more difficult to sell to retail investors.

Judge Valerie Caproni dismissed the alliance's emergency motion on November 3 due to a lack of substantial harm evidence, but at the same time stated that the alliance is likely to prevail on the legal classification argument.

· Parties Involved: Coinbase, Kalshi, Kraken's parent company Payward, DRW, Jump, and Paradigm have submitted a joint brief arguing that these contracts qualify as security futures.

Meanwhile, Better Markets and former SEC Commissioner Allison Herren Lee are applying to present their opinion on behalf of the alliance. The case's hearing date has not yet been determined.

Before Judge Lorna Schofield makes a ruling on the alliance's injunction request, the related products launched by Kalshi last week will continue to trade normally.