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Terry Duffy has a bone to pick with perpetual futures, and he’s not being subtle about it. The CME Group CEO used remarks on July 22 to highlight what he considers a ticking time bomb buried inside the recent wave of US-listed perps: nobody seems to know how they’ll be taxed.
The concern isn’t academic. How these instruments get classified, whether as futures or swaps, determines whether traders enjoy favorable capital gains treatment or get hit with ordinary income rates. That’s a meaningful difference for anyone trading size, and Duffy is arguing the CFTC greenlit these products without sorting out the answer first.
The classification question that could cost traders real money
Here’s the core issue. Traditional futures contracts in the US fall under Section 1256 of the tax code. That section offers a blended tax rate, treating 60% of gains as long-term capital gains and 40% as short-term, regardless of how long the position was held.
Perpetual futures, though, don’t behave like traditional futures. They have no expiration date and no delivery mechanism. They’re contracts that let you bet on the price of something indefinitely, with a funding rate mechanism that keeps the contract price tethered to the spot market.
The problem is that this structure looks a lot more like a swap than a futures contract. And swaps don’t get Section 1256 treatment. Gains from swaps are taxed as ordinary income.
Duffy’s argument is straightforward: if perps get approved as futures but later get reclassified as swaps for tax purposes, every trader who assumed favorable treatment could face unexpected tax liabilities.
CME takes the fight to court
Duffy hasn’t limited his objections to public commentary. CME Group filed a lawsuit against the CFTC in June 2026, directly challenging the regulator’s decision to approve Kalshi’s Bitcoin perpetual futures contract. Kalshi had received that approval in May 2026, becoming the first US exchange to offer CFTC-regulated Bitcoin perps.
The lawsuit alleges regulatory discrepancies in how the approval was handled. CME’s position essentially boils down to the idea that the CFTC moved too fast in blessing a product category that doesn’t fit neatly into existing regulatory frameworks.
Duffy noted that 94% of CME’s trading volume comes from institutional clients. According to him, those institutions have shown zero demand for perpetual futures. The implication is clear: the people with the most money at stake don’t want to touch a product with unresolved tax treatment.
The competitive landscape is shifting fast
The push to bring perps onshore and under CFTC oversight represents one of the more consequential regulatory experiments of 2026. Kalshi’s approval opened the door, and other platforms are reportedly pursuing similar authorizations. Margin rules, retail investor protections, and tax reporting standards are all areas where the existing framework wasn’t designed for a product that never expires.
What this means for traders and investors
The tax classification question matters most for US-based traders who plan to use regulated perpetual futures. If the IRS ultimately treats perps as Section 1256 contracts, traders get the 60/40 blended rate. If they’re classified as swaps or some other category, gains would be taxed at ordinary income rates.
Tax advisors can’t give definitive guidance on how to report gains from a product whose classification is being actively litigated. When 94% of CME’s volume comes from institutions and those institutions won’t touch a product because the tax rules are unclear, the market implications are significant.
Duffy acknowledged that CME is prepared to launch its own perpetual futures contracts if client demand materializes. For now, the lawsuit moves forward, the tax questions remain open, and US traders considering regulated perps should probably have a conversation with their accountant before their broker.
Disclosure: This article was edited by Editorial Team. For more information on how we create and review content, see our Editorial Policy.
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