Close negotiations with CFTC! Kalshi seeks regulatory breakthrough, planning to expand "perpetual" derivatives to the forex and gold markets.

Notice that the predictive market platform Kalshi allows users to bet on various events such as sports matches, election results, and weather. A senior executive of the company mentioned that they are planning to expand their business to cover derivative products without expiration dates in the metal, forex, and energy markets. The platform aims to compete with traditional exchange operators by offering so-called "perpetual futures." Unlike traditional derivative contracts, perpetual futures contracts have no expiration date. After the Commodity Futures Trading Commission (CFTC) cleared the way for registered US trading venues to offer such contracts, Kalshi launched the first perpetual futures contract for cryptocurrency trading in May. The executive mentioned that the platform is currently seeking approval from regulatory authorities to introduce these products in other asset classes. Udesh Jha, Kalshi's Chief Risk Officer, said, "In addition to cryptocurrencies, the other asset classes we are considering are largely driven by market demand, such as gold." Jha stated that the company is in deep discussions with regulatory agencies to seek approval to expand perpetual futures to include other asset classes like forex and energy. "Gold is an asset that is under consideration because it is friendly to retail investors. Our participants tend to be retail investors, but we also have institutional investors." Perpetual futures contracts, also known as "perps," are futures contracts without expiration dates. This means investors can hold a position in an asset indefinitely without having to close or roll over the contract. Perpetual contracts also allow traders to leverage heavily, sometimes up to 50 times the value of the contract, to amplify their bets. Critics warn that these contracts are risky for retail investors because they may not fully understand their complexity and could face significant losses even with a slight adverse price movement. Terry Duffy, the outgoing CEO of the CME, criticized the CFTC's decision to allow the introduction of perpetual contracts in June, calling these products a "disaster waiting to happen." Since then, the CME has sued the CFTC and its chairman, Michael Selig, challenging the recent decision to allow Kalshi and cryptocurrency exchange Coinbase to list perpetual futures. Many see this lawsuit as a move to protect the CME's position as the largest derivatives exchange in the US. Jha mentioned that Kalshi is also considering the potential to expand perpetual futures to include broad-based indices and individual stocks. Since these derivatives were launched on Kalshi, perpetual contracts have contributed $161 billion in trading volume to the platform. "For most of these asset classes, we have to figure out how to enter, but due to geopolitical and seasonal reasons, there is likely to be strong demand from investors for forex, metals, and energy," Jha said. "If you look at our trading volume, a large portion of it comes from institutional investors." Competitive Threats Kalshi's latest move, previously unreported, comes as traditional derivative exchanges are trying to cope with the disruption that perpetual contracts could bring to their core businesses. After the CFTC approved perpetual contracts, shares of major US exchange operators such as CME, Chicago Board Options Exchange, Nasdaq, and Intercontinental Exchange (ICE), the parent company of the New York Stock Exchange, experienced significant selling pressure as investors feared increased competition for traditional derivatives. In June of this year, Kalshi co-founder Tarek Mansour told the media that the company was considering expanding its perpetual futures business, but did not specify which other asset classes the company would target. The regulatory agency stated in June that the CFTC is currently seeking public opinion on the possible extension of perpetual contracts to products linked to deliverable or storable energy commodities (such as crude oil). According to an anonymous source, other asset classes' perpetual contract trading will occur during regular trading hours if approved, as these products are still under review. Until recently, perpetual futures were mainly traded on offshore trading platforms. They have been in a regulatory gray area, neither banned nor explicitly approved. According to Kalshi's estimates, trading volume for perpetual futures on overseas platforms surged to $900 trillion last year, more than three times the volume in 2023.