Coinbase Proposes New Framework for Equity Perpetual Derivatives to Regulators

Coinbase has submitted a proposal to the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) aimed at allowing the exchange to offer equity perpetual derivatives to U.S. traders. The proposal, submitted on August 24-25, suggests classifying these derivatives as 'security futures' under the Commodity Exchange Act, which would enable onshore trading through existing regulatory frameworks without the need for new rules.

The letter, signed by Coinbase executives Scott Bauguess and Julia Hueckel, responds to a joint request from the CFTC and SEC regarding the definitions of 'swap' and 'security-based swap.' By categorizing equity perpetuals as security futures, Coinbase seeks to eliminate jurisdictional confusion that has previously hindered U.S. regulated platforms from engaging in this market segment. This classification would allow CFTC-registered contract markets to offer these products via streamlined notice registration with the SEC, facilitating a more integrated regulatory approach.

Perpetual contracts, which allow traders to take leveraged positions on asset prices without an expiration date, have gained popularity in offshore markets. Coinbase's initiative is part of its broader 'Everything Exchange' strategy, which aims to expand its offerings beyond spot crypto trading to a wider array of financial products. Earlier this year, Coinbase Derivatives launched perpetual-style equity index futures linked to thematic baskets such as AI10 and Defense10, further establishing its presence in the derivatives market.

The proposal addresses a significant regulatory gap in the U.S. derivatives market, where ambiguity over the classification of equity perpetuals has led many platforms to avoid this category altogether. Coinbase argues that clarifying these definitions would enhance liquidity and foster innovation within the domestic market, benefiting both regulators and traders alike. By maintaining oversight without ceding jurisdiction, both the CFTC and SEC could gain better visibility into a product category currently operating outside their regulatory reach.

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Source: KLEA News