Prediction market platform Kalshi, which enables users to place bets on events ranging from sports and election outcomes to weather patterns, is planning to expand its offerings to include no-expiry derivatives covering metals, foreign exchange, and energy markets. A company executive revealed this strategy, which is designed to compete with traditional exchange operators by offering so-called "perpetual futures."
Unlike standard derivative contracts, perpetual futures have no set expiration date. Following a move by the Commodity Futures Trading Commission (CFTC) to clear the path for registered US trading venues to list such contracts, Kalshi launched the nation's first perpetual futures contract for cryptocurrency trading in May. The executive stated the platform is now seeking regulatory approval to introduce these products for other asset classes.
Kalshi's Chief Risk Officer, Udhesh Jaw, indicated that beyond cryptocurrency, "the other asset classes we are looking at are largely market-driven, such as assets like gold." Jaw noted the company is in advanced discussions with regulators to secure approval for extending perpetual futures to other asset categories, including foreign exchange and energy. "Gold is an asset under consideration because it is retail-friendly. Our participants lean towards retail, but there are also institutional investors," he added.
Perpetual futures contracts, often called "perps," are futures contracts without an expiry date. This allows investors to maintain a position in an asset indefinitely without the need to close or roll over the contract. These contracts also permit traders to borrow heavily, sometimes with leverage as high as 50 times the contract's value, to amplify their bets.
Critics have warned that such contracts pose significant risks for retail investors, who may not fully grasp their complexities and could face substantial losses even from minor adverse price movements. Terry Duffy, the outgoing CEO of CME Group Inc (CME), criticized the CFTC's decision to permit perpetual contracts in June, labeling the products a "disaster waiting to happen." Subsequently, CME Group Inc has sued the CFTC and its chairman, Michael S. Gill, challenging the recent decisions allowing Kalshi and cryptocurrency exchange Coinbase to list perpetual futures. Many view this lawsuit as an effort to protect CME Group Inc's position as the leading US derivatives exchange.
Jaw mentioned that Kalshi is also exploring potential opportunities to extend perpetual futures to contracts linked to broad market indices and individual stocks. Since the launch of these derivatives on Kalshi, perpetual contracts have generated $16.1 billion in trading volume for the platform. "For most of these asset classes, we have to figure out the entry point, but foreign exchange, metals, and energy could be the sectors with the strongest investor demand due to geopolitical and seasonal factors," Jaw explained. "If you look at the trading volume we have, a significant portion of it comes primarily from institutional investors."
Competitive Landscape
This latest move by Kalshi, previously unreported, comes as traditional derivatives exchanges grapple with the potential disruption perpetual contracts could pose to their core business. Following the CFTC's approval of perpetual contracts, shares of major US exchange operators, including CME Group Inc, Cboe Global Markets, Nasdaq Inc, and Intercontinental Exchange (ICE), the parent of the New York Stock Exchange, experienced significant sell-offs as investors grew concerned about heightened competition for traditional derivatives.
In June, Kalshi co-founder Tarek Mansour told media the company was considering expanding its perpetual futures business but did not specify which other asset classes it would target at the time. The regulator stated in June that the CFTC is currently soliciting public comment on potentially extending perpetual contracts to products linked to deliverable or storable energy commodities, such as crude oil.
According to a person familiar with the matter who requested anonymity, if approved, trading of perpetual contracts for other asset classes would occur during regular trading hours, not around the clock, as these products remain under review.
Until recently, perpetual futures were primarily traded on offshore venues. They existed in a regulatory gray area, neither explicitly banned nor approved. Kalshi estimates that trading volume for perpetual futures on overseas platforms surged to $90 trillion last year, more than triple the volume seen in 2023.
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