CME CEO Warns That Approval of Perpetual Futures in the U.S. May Cause Tax Uncertainty

ChainCatcher reports that Terry Duffy, Chairman and CEO of CME Group, stated that U.S. approval of perpetual futures contracts could expose traders to tax and regulatory uncertainty, as these products may ultimately be classified as swaps rather than futures. Duffy noted that the periodic exchange of funding rates between long and short positions in perpetual contracts aligns with the statutory definition of swaps under U.S. law. The U.S. Commodity Futures Trading Commission (CFTC) currently classifies them as futures, and CME is pursuing legal action against the CFTC regarding this classification. Duffy highlighted that if perpetual contracts are treated as futures, certain institutional traders may qualify for the mixed tax treatment under U.S. tax code Section 1256; if classified as swaps, they would likely be taxed under ordinary income rules. The Internal Revenue Service (IRS) has not yet issued specific guidance on the tax treatment of perpetual futures. Legal experts note that while perpetual futures are structurally similar to swaps, their economic function resembles that of futures, and court interpretations of these definitions will be critical. Even if litigation clarifies the product classification, the IRS may still need to issue separate guidance on tax treatment.