A group representing major US commodity exchanges has urged the Commodity Futures Trading Commission to reject Kalshi’s proposed oil perpetual futures contract over concerns about market integrity.
Summary
- Commodity exchanges including CME Group have urged the CFTC to reject Kalshi’s proposed oil perpetual futures contract over market integrity concerns.
- Kalshi’s proposed contract would allow traders to maintain exposure to WTI crude oil prices without a fixed expiration date.
- The Commodity Markets Council has asked US regulators to restrict retail access to offshore derivatives platforms through VPNs.
- Kalshi is expanding its futures offerings while facing separate legal challenges from US states over its prediction markets.
According to Bloomberg, the Commodity Markets Council (CMC), whose members include CME Group and other established derivatives exchanges, has warned the regulator against approving the proposed contract linked to West Texas Intermediate crude oil.
The industry group has questioned the risks associated with perpetual futures in commodity markets and wants regulators to prevent US retail traders from accessing offshore derivatives platforms through virtual private networks.
CMC’s objections follow Kalshi’s October 20 filing for a product known as WTIPERP, which would allow traders to maintain exposure to oil prices without having to move their positions into a new monthly futures contract.
The council’s letter reportedly did not identify Kalshi by name, although the contract details and filing dates cited in its submission correspond to the company’s proposal.
Kalshi oil futures proposal faces industry opposition
Kalshi’s proposed contract would track WTI crude oil prices using a reference calculated from two nearby futures contracts traded on the New York Mercantile Exchange.
Unlike conventional oil futures, which expire on specified dates, WTIPERP is designed to maintain a continuous position through a pricing mechanism tied to the existing futures market.
The proposed structure uses daily funding payments to keep the contract’s trading price aligned with its reference price. Each cash settled contract would represent 100 barrels of oil, compared with the 1,000 barrels covered by a standard WTI futures contract.
Trading would follow conventional oil futures market hours, including weekend closures, holidays and scheduled early closing periods. Kalshi has included provisions to halt trading when the underlying market is suspended.
CMC has questioned whether such contracts can maintain the same connection to physical commodity markets as conventional futures approaching their delivery dates.
Traditional futures prices generally converge toward physical market prices as delivery approaches, while perpetual contracts depend on funding mechanisms to maintain their relationship with the markets they track.
Kalshi has maintained that its proposed pricing structure would remain connected to conventional oil futures. The company reportedly told Bloomberg that it had consulted industry groups before submitting the proposal, although some had not raised specific objections.
The CFTC has not approved WTIPERP, and the proposed product remains subject to regulatory review.
Offshore perpetual exchanges face regulatory scrutiny
CMC’s concerns extend beyond contracts offered by regulated US exchanges.
The council has asked the CFTC to coordinate with foreign regulators to restrict access to offshore derivatives platforms that allow American retail traders to participate through VPNs.
Decentralized exchanges such as Hyperliquid have developed perpetual futures markets linked to cryptocurrencies and traditional financial assets, including commodities and stock indexes.
Unlike the proposed Kalshi oil contract, some offshore perpetual markets operate continuously, allowing traders to take positions outside the regular trading hours of established commodity exchanges.
CMC and other established market participants have raised concerns about manipulation, market oversight and sanctions compliance in decentralized derivatives trading.
Hyperliquid has reportedly been engaging with US regulators about entering the domestic market under applicable regulatory requirements, although no approval has been announced.
Kalshi, meanwhile, has been expanding its derivatives offerings beyond event contracts.
The company already offers perpetual products linked to Bitcoin, Ethereum, XRP and HYPE, alongside contracts covering precious metals and stock market indexes.
Its proposed oil contract would give eligible traders another regulated venue for gaining exposure to crude prices if the CFTC grants approval.
Kalshi faces separate challenges over prediction markets
Kalshi’s derivatives expansion comes while the company continues to fight state regulators over whether its event contracts fall under federal derivatives rules or state gambling laws.
Utah Attorney General Derek Brown filed a civil lawsuit on October 20 accusing Kalshi and related defendants of offering illegal gambling products through contracts tied to sports, politics and other events.
As crypto.news reported on October 21, Utah is seeking to recover up to $61.2 million in allegedly unlawful fees and prevent the platform from offering the disputed contracts to state residents.
Brown said the activities were causing significant ongoing harm to Utah residents and asked the court to order financial restitution and other remedies.
Kalshi had already lost an emergency appeal in September, when the Tenth Circuit refused to prevent Utah from enforcing its gambling laws while the company’s appeal continued.
Federal courts have been divided over whether states can enforce their gambling laws against Kalshi’s sports prediction markets.
The Third Circuit ruled in Kalshi’s favor in a case involving New Jersey, while courts hearing similar disputes in Nevada, Ohio and Tennessee have reached different conclusions, allowing states to enforce certain gambling restrictions.
New Jersey has since taken the dispute to the Supreme Court, asking the justices to decide whether federal commodities law prevents states from regulating sports event contracts. The National Football League backed the state’s request in an October 8 filing.
The Supreme Court review request remains pending, with Kalshi given until November 9 to respond.
Meanwhile, the CFTC has sent proposed event contract rules to the White House for review. The proposals address how certain event contracts should be classified under federal derivatives law and whether products resembling casino gambling should be permitted.