Kalshi's crypto perpetuals reignite futures-vs-swaps…

Kalshi's launch of CFTC-regulated crypto perpetual contracts has reopened one of derivatives regulation's oldest fault lines: are perpetuals futures or swaps? The question surfaced publicly when John Lothian, publisher of John Lothian News, and Udesh Jha, Kalshi's head of exchange analytics, squared off on The Policy Protocol podcast.

Lothian argues that perpetuals resemble swaps because their funding-rate mechanism generates recurring bilateral cash flows between counterparties — a structural feature he associates with swap treatment under U.S. law. Jha counters that funding rates simply make financing costs explicit rather than embedding them in the contract price, and that perpetuals are exchange-traded, centrally cleared, and designed to track spot markets — all hallmarks of futures. He also notes that perpetuals eliminate the costly roll cycle that burdens traditional futures traders.

Why it matters

The classification is not academic. If regulators or courts ultimately label perpetuals as swaps, retail access could be curtailed unless Congress creates new frameworks — swaps carry stricter eligibility rules than futures. Jha's counter-argument is that bringing perpetual trading onshore, under CFTC oversight, gives U.S. customers regulated access to a product already generating trillions of dollars in offshore volume.

The stakes extend to customer protections, tax treatment, and the competitive balance between U.S. venues and offshore crypto exchanges that have offered perpetuals for years without equivalent oversight.

Market impact

Lothian also flagged a manipulation concern: funding-rate calculation windows could incentivize traders to move prices around settlement periods to benefit large positions.