Two derivatives veterans are publicly clashing over whether Kalshi’s CFTC-regulated crypto perpetuals fit the legal definition of futures or swaps — a classification fight with real consequences for who can trade them.
The Funding Rate Fault Line
John Lothian, publisher of John Lothian News, argues that perpetuals are swaps. His reasoning: funding-rate payments create recurring bilateral cash flows between market participants — a feature he associates with swaps, not futures. Udesh Jha, Kalshi’s head of exchange analytics, counters that funding rates simply make financing costs explicit, rather than embedding them in futures prices. Jha says this makes perpetuals a more efficient version of existing futures markets, while eliminating the need for traders to roll positions into new contract months.
The distinction matters. Label perpetuals as swaps, and they could face different regulatory treatment — potentially limiting retail access unless Congress or the CFTC create new frameworks. Jha points out that bringing perpetual trading onshore already unlocks a product that generates trillions of dollars in offshore volume, and that Kalshi’s version offers stronger protections and oversight.
Manipulation Risks and Continuous Settlement
Lothian also warns that funding-rate calculation windows could create incentives for traders to influence prices around settlement periods, a manipulation vector he says is inherent in perpetual-style contracts. Jha responds that Kalshi calculates funding rates continuously throughout funding cycles, not from a single closing period. Continuous calculation, he argues, reduces the window for manipulation compared to traditional futures that settle at a discrete point.
The debate isn't academic. Classification will influence customer protections, market structure, tax treatment, and the competitive dynamics between U.S. and offshore crypto venues.
What This Means for U.S. Crypto Derivatives
Both sides agree on one thing: the debate won't end with Kalshi’s launch. Lothian wants regulators to preserve longstanding distinctions between futures and swaps. Jha believes existing legal principles already support treating perpetuals as futures, and that what’s really needed is better market education.
As more U.S. venues launch perpetuals, regulators will have to decide whether legacy definitions can accommodate products designed to never expire.
Source: Kalshi's crypto perpetuals spark debate over whether they're futures or swaps
Domain: coindesk.com
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