CME is arguing that the move is harmful to its long-term futures products. The lawsuit alleges that the CFTC did not consider the consequences of approving the swaps, and that these products are actually “swaps”, not “futures” as defined by the Dodd-Frank Act.
Each term refers to how the products themselves are to be regulated and what the requirements are for the companies releasing them. CME CEO Terrence Duffy, who recently announced he was stepping down next year, told CNBC last week that different rules are necessary for participants.
“The CFTC did not engage in its own analysis of whether approving Kalshi’s Bitcoin as a future was consistent with the law,” CME’s lawsuit says. “The CFTC did not even cite the relevant Dodd-Frank provision defining ‘swap’. In fact, the word ‘swap’ does not appear anywhere in the order.”
The CFTC instead merely “rubberstamped Kalshi’s application,” the lawsuit claimed.
Interestingly, the actual scenario of companies gaining Designated Contract Market (DCM) approval and going into Purpose is growing at a rapid pace. The same day the CFTC approved Kalshi’s application, it sent a no-action letter to Coinbase, opening the door for that exchange to list Purpose as well – albeit through an offshore intermediary.