DRW founder says regulators misunderstand perpetual contracts, which are essentially futures without an expiry date

Odaily Odaily News: DRW founder and CEO Don Wilson stated in a post that there is a widespread misunderstanding of perpetual futures among markets and regulators, and that perpetual contracts are essentially futures contracts with no expiry date.

Wilson pointed out that features such as high leverage, auto-deleveraging (ADL), 24/7 trading, and continuous margin settlement are not inherent attributes of perpetual contracts, but rather product mechanisms designed by crypto trading platforms based on digital collateral and real-time margin calculation environments.

He stated that the core innovation of perpetual contracts lies in eliminating the need for investors to repeatedly roll over positions, thereby reducing transaction costs, minimizing market impact and rollover slippage, allowing positions to operate closer to the front end of the futures curve.

Addressing the regulatory debate in the U.S. on whether perpetual contracts should be classified as futures or swaps, Wilson believes the decision should be based on economic substance. There is no reason to classify perpetual contracts as swaps simply because they lack an expiry date, as their essence remains that of futures. He called for broader application of perpetual futures in the markets for commodities, securities, and crypto assets for price discovery and risk management.