CME CEO: US Perpetual Futures Approval Could Bring Tax Uncertainty

Odaily reports that CME Group Chairman and CEO Terry Duffy stated that US approval of perpetual futures contracts could expose traders to tax and regulatory uncertainty, as the products may ultimately be classified as swaps rather than futures.



Duffy explained that in perpetual contracts, both long and short parties periodically exchange funding rates, a mechanism that aligns with the legal definition of a swap under US law. The Commodity Futures Trading Commission (CFTC) currently classifies them as futures, and CME is pursuing a legal challenge against the CFTC regarding this approval.



Duffy noted that if perpetual contracts are treated as futures, some institutional traders may qualify for the mixed tax treatment under Section 1256 of the US tax code. If classified as swaps, they may be taxed under ordinary tax rules. The Internal Revenue Service (IRS) has not yet issued specific guidance on the tax treatment of perpetual futures.



Legal experts stated that perpetual futures are structurally similar to swaps but economically function like futures, and the court's interpretation of the relevant definitions will be crucial. Even if the lawsuit clarifies product classification, the IRS may still need to issue separate tax guidance.