Multi-Trillion-Dollar Offshore Engine Driving 90% of Crypto Trading Arrives in the US as CME Sues to Halt It

Coinbase has begun offering US perpetual-style futures on its CFTC-regulated derivatives exchange, launching with nano Bitcoin and Ethereum contracts that track spot prices, carry embedded leverage, and trade around the clock.

This financial product accounts for the majority of crypto leverage globally, and it has now entered the US market. Beyond providing another method to bet on Bitcoin, it introduces the entire machinery that has essentially dictated offshore price discovery for years.

The US market is now importing funding payments, continuous leverage, and automatic liquidations across several exchanges, each built to different specifications.

Perpetual futures constitute the vast majority of crypto derivatives activity. Coinbase estimates that these contracts account for upwards of 90% of derivatives volume in some metrics, with derivatives themselves representing roughly 80% of all crypto trading.

For years, this activity occurred almost entirely on exchanges outside American oversight, with US traders accessing offshore platforms via VPN. The barrier broke on May 29, when the CFTC approved KalshiEX’s BTCPERP as a futures contract referencing Bitcoin’s spot price and issued a policy statement inviting other exchanges to bring similar contracts through the same regulatory pathway.

On June 12, the CFTC provided designated contract markets with a conditional route to remove expiration dates from existing perpetual-style crypto futures, converting them into genuine no-expiry contracts.

The framework enabling this development is now the subject of a federal court battle. The outcome of this legal dispute will determine the extent to which perpetual futures can expand within the US market.

On June 18, CME sued the CFTC and Chairman Michael Selig in the District of Columbia, seeking a judicial order to vacate the Kalshi order and the accompanying policy statement. The complaint argues that the chairman overrode Congress’s definition of a swap with a single stroke of his pen, sidestepping the regulatory framework Congress established for such derivatives.

CME’s position is that perpetuals meet the statutory definition of swaps under the Commodity Exchange Act. This classification would subject them to a heavier regime of dealer registration, capital rules, and reporting, and would route benchmark licensing back to incumbents like CME. Selig, the agency’s sole confirmed commissioner, approved Kalshi’s application in a single day.

The CFTC is not taking the challenge lightly. A spokesperson stated that CME had chosen to engage in lawfare against the agency and the administration’s pro-innovation agenda, accusing incumbents of fearing competition on a level playing field. The agency promised to have the suit, which it labeled frivolous, dismissed.

The commercial stakes of this legal battle are already significant. CME’s complaint notes that Kalshi has self-certified more than a dozen additional crypto perpetuals under the order, with trading volume already surpassing $1 billion. The agency has also defended its jurisdiction on other fronts, suing Kentucky in late June over which authority governs contract markets. With no ruling yet issued and the case in its early stages, every exchange building a US perpetual product is doing so on a legal foundation that a court could still alter.

What do perpetual futures look like in the US?

A conventional future expires on a set date, requiring traders who wish to maintain exposure past that date to close their position or roll it into a later contract. A perpetual future is designed to run indefinitely. Because it lacks an approaching settlement date to pull its price toward spot, it utilizes recurring funding payments between traders holding long positions and those holding short positions.

When a perpetual trades above spot, funding generally requires longs to pay shorts, making holding an expensive long less attractive and encouraging selling. When it trades below spot, the payment structure flips, and shorts tend to pay longs.

Two different structures now share the same label in the US. Kalshi’s BTCPERP is a genuine no-expiry perpetual. Coinbase’s contracts are structured as long-dated futures with five-year expirations and an hourly funding rate settled twice a day. This structure closely mirrors a perpetual’s price behavior while remaining within existing futures rules.

The CFTC’s June conversion route is the mechanism that allows these long-dated substitutes to eventually drop their expiration dates and become true perpetuals, which is why the term “perpetual futures” now covers two legally distinct American products.

Crypto markets operate continuously, with no Friday close and no monthly expiry cycle, an environment for which perpetuals were designed. A no-expiry leveraged contract allows traders to hold or adjust exposure at any hour without selecting a contract month, folding speculation, hedging, market-making inventory, and basis trades into a single instrument.

Exchanges favor this format because a single contract pools liquidity that would otherwise be split across several dated expirations. This concentration deepens liquidity but also gives outsized influence to one funding rate and one liquidation engine, meaning a sharp positioning imbalance can travel through the market faster than it would across a ladder of dated contracts.

The US model has diverged significantly from the offshore model it is emulating. The country is building several perpetual markets simultaneously: Kalshi lists true perpetuals and has expanded well beyond Bitcoin into Ether, XRP, and a widening roster of tokens. Coinbase operates perpetual-style futures on its domestic exchange and, separately, opened a regulated channel on May 29 for US clients to access global perpetual and options liquidity through its Deribit affiliate, the largest crypto options venue, which held more than $31 billion in Bitcoin options open interest in late May.

CME moved its dated crypto futures and options to 24/7 trading on that same day, closing the weekend gap that had separated it from spot markets. Its complex recorded $3 trillion in notional crypto volume last year and an average daily volume of roughly 407,200 contracts this year.

The contract structure, leverage, clearing, collateral, and reference prices of these various routes are completely different. This means regulated access can widen at the very moment liquidity, margin, and open interest spread across more locations that cannot efficiently share collateral.

Funding, liquidations, and the contest over price discovery

Funding is often described as a fee, but it is easier to understand as a live reading of where leverage is concentrated and a continuous force pulling the contract back toward spot.

When demand for leveraged longs pushes a perpetual above spot, an arbitrageur can short the perpetual and buy spot Bitcoin, ETFs, or dated futures to capture that funding. This hedge itself drives spot order flow, ETF creations, and CME basis movements.

Executed at scale, this trade demonstrates how perpetual positioning can shape the very spot market the contract is meant to follow. A liquid US perpetual would also produce its own domestic funding curve, a regulated gauge of leveraged demand to sit alongside the offshore rates traders have monitored for years. Should this US curve settle at a persistent gap to offshore funding, it would expose real differences in customer base, leverage limits, and capital mobility between the two systems, providing the US market with better insight into whether demand is directional or hedged.

Leverage allows a small amount of collateral to control a much larger position, but the trade-off is that a modest drop can quickly exhaust the margin behind it. Once an account falls below maintenance levels, the exchange automatically closes it. A liquidated long becomes a market sell, a liquidated short becomes a market buy, and these forced orders can drive price into the liquidation levels of other traders, triggering the next wave of liquidations.

Continuous trading, high leverage, and fragmented liquidity make these cascades especially visible in digital assets. Bringing this machinery onshore could make US price discovery more continuous, but it could also make US prices more reflexive, with Bitcoin moving because positions are being closed under margin pressure—a mechanical push largely unrelated to changes in fundamental value.

A regulated venue helps mitigate specific risks: segregated customer funds, disclosed contract specifications, market surveillance, rule-based liquidation procedures, and US legal recourse. However, it does not eliminate volatility, funding costs, leverage, or the possibility that a liquidation engine cannot close a large position without moving the market against the account being closed. A perpetual can be fully regulated and still automatically liquidate a trader.

The exchange that ultimately wins this competition may be the one that allows traders to use collateral most efficiently across spot, ETFs, futures, options, and perpetuals. Currently, capital is often separated across spot accounts, futures commission merchants, clearinghouses, brokerage accounts, and offshore exchanges. Every separation carries a funding cost, because a position posted in one pool cannot back a hedge in another.

A trader holding a Bitcoin ETF may be unable to use it directly against a perpetual short, and a CME futures position may sit in a different margin pool from a domestic perpetual.

The next wave of competition in the derivatives market aims to solve this inefficiency.

Coinbase Derivatives and the clearinghouse Nodal Clear, part of Deutsche Börse’s EEX Group, are working toward accepting Circle’s USDC as collateral for US futures. Coinbase Custody Trust would hold the stablecoin, with the plan pending CFTC approval. If cleared, it would mark the first regulated use of a stablecoin as margin in the American futures system, allowing traders to post crypto-native cash against regulated positions without converting to fiat first.

Capital efficiency of this kind determines how cheaply traders can close price gaps between all these platforms, serving as a larger competitive lever than simply listing more assets.

The real test will not be how many contracts each exchange lists, as all can list as many as they want almost immediately. The true test will occur during the next bout of Bitcoin volatility, when the US market will reveal whether domestic perpetuals absorb the move, lead it, or amplify it. Perpetuals will also be tested in court, where a judge must decide whether the contract behind this entire buildout is actually a future or a swap. That ruling could either cement the onshore market the industry has assembled over the past year or send it back through the heavier regulatory door CME argues Congress built.

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