Kalshi, a prediction markets exchange regulated by the US Commodity Futures Trading Commission (CFTC) where users trade contracts on the outcome of events, asked the regulator on 18 Aug to approve a perpetual futures contract on a US large-cap stock index. It did so under the voluntary product approval process, the slower of the two routes available to it.
The faster route, self-certification, is the one CME Group, the largest US futures exchange, is suing the CFTC over. Kalshi, which started as a platform on which traders could buy contracts on election outcomes and the like, has been rapidly expanding into CME's turf.
It's assembling the only venue where a US trader can get regulated, never-expiring exposure to equity indices, metals and crypto, while a federal lawsuit argues the entire product class was approved unlawfully. How that suit ends decides whether this market keeps existing in the US at all. Filing the slow way, however, shields the newest contract from the procedural half of the attack.
The procedural fight Kalshi just sidestepped
CME filed suit in the federal district court in Washington on 18 Jun against the CFTC and Michael Selig, its chairman and currently its only Senate-confirmed commissioner. It seeks to void the CFTC's 29 May order approving Kalshi's Bitcoin (BTC) perpetual, BTCPERP, along with the policy statement issued alongside it inviting other exchanges to bring perpetuals forward.
CME's complaint runs on two tracks. The substantive one is that perpetual contracts are swaps rather than futures under the Commodity Exchange Act because two parties exchange funding payments continuously and nothing is ever delivered or settled at a fixed date. Swaps carry heavier obligations, including dealer registration and stricter margin. The procedural argument is that the CFTC allowed the BTCPERP product to proceed through Section 40.2 self-certification, which permits an exchange to list a product on one business day's notice, when CME says a novel contract of this kind should instead have gone through the fuller Section 40.3 review process, including a public comment period.
By submitting the contract for approval rather than self-certifying it, Kalshi has taken the route CME says should have been used in May. Whether that is caution, litigation strategy or both, it removes the procedural objection from this particular contract while the argument about the last one continues.
Sandmark covered the CME lawsuit when it was filed in June.
Around the benchmark, not through it
The index itself is another important part of the proposal. The contract would track the MerQube US Large Cap Index, a float-weighted measure of the 500 largest companies listed and domiciled in the US.
MerQube is a San Francisco-based index provider founded in 2019 whose co-founders include Keith Loggie, the former chair of the S&P 500 index committee at S&P Dow Jones Indices. Its benchmark is not the S&P 500, a distinction Reuters later corrected after initially describing it that way.
That distinction is doing work. CME CEO Terrence Duffy has said publicly that his exchange holds exclusive licences with the major benchmark providers whose indices underpin crypto derivatives pricing, and that if perpetuals were reclassified as swaps, rivals would have to route through CME's licensing regardless. Kalshi has chosen an index outside that arrangement.
The contract would carry a $1 multiplier per index point and a minimum tick of $0.05, trading continuously from 22:00UTC Sunday to 21:00UTC Friday. Funding is calculated only against regular equity-session prices and settled daily at the 20:00UTC New York close, which is a concession to the fact that the underlying market shuts while the contract does not.
Kalshi filed a cash-settled copper perpetual on the same day, having filed for gold and silver last month. No approval from the securities regulator is needed for the equity index contract because broad-based equity baskets sit with the CFTC rather than the US Securities and Exchange Commission.
What is actually being built here
Read together, the filings describe something besides a prediction market adding products. A venue that a year ago allowed clients to bet on election outcomes is assembling a multi-asset derivatives exchange: crypto, precious metals, industrial metals and now equity indices, all in the same never-expiring format.
The CFTC has encouraged it. Selig has framed the policy as bringing onshore a product class that had developed almost entirely offshore, where perpetual volumes reached $62tn last year, up 29%, according to CryptoQuant, a South Korean crypto market data provider.
The commercial stakes are visible in CME's own filing, which says Kalshi has self-certified more than a dozen further crypto perpetuals under the May order and that trading in them already exceeds $1bn.
What filing slowly does not fix
None of this settles the legal argument. If the court finds perpetual contracts are swaps, the classification problem reaches every contract Kalshi has listed in this format, including any equity index perp approved in the meantime. Filing under the slower process protects against a procedural defect. It does not protect against the substantive one.
Meanwhile, Kalshi is fighting on a second front entirely, with roughly a dozen states contesting whether its sports contracts amount to unlicensed gambling, a dispute in which the CFTC has defended exclusive federal jurisdiction on the company's behalf.
The same regulator is defending Kalshi against the states and being sued by CME for having let it list the product it is now asking permission to extend.
Sandmark asked Kalshi about the choice of filing route and the timeline for the contract, and asked CME whether the new filing has any bearing on its case. No response had been received by the time of publication from Kalshi. The CME declined to provide information beyond that already disclosed.
