High leverage, high risk! The U.S. approves the first batch of "perpetual contracts," fully embracing the "crypto trading model."

The U.S. derivatives regulator has officially given the green light to “perpetual contracts,” introducing this previously high-leverage tool, long in a regulatory gray area, into the traditional market system.

On Friday, May 29, the U.S. Commodity Futures Trading Commission (CFTC) announced it has approved the listing and trading of perpetual contracts pegged to the spot price of Bitcoin, and stated it will review applications for contracts linked to other assets on a case-by-case basis.

This move is a response to the explosive growth of the decentralized exchange Hyperliquid, a Singapore-based platform which has, in an unregulated environment, amassed a huge user base and trading volume.

Prediction market operator Kalshi and cryptocurrency exchange Coinbase immediately announced they have received CFTC approval and will “soon” launch regulated perpetual contract products in the U.S.

This regulatory softening will further promote the use of these high-risk, high-leverage contracts in the U.S. market. Perpetual contracts commonly allow traders to bet on asset prices with leverage as high as 40x.

What are perpetual contracts?

Perpetual contracts are a type of derivative without expiry, allowing traders to make directional bets on asset prices without physical delivery.

The core appeal of such contracts is their simplicity and the ability to greatly amplify leverage to pursue higher returns.

The decentralized exchange Hyperliquid allows users to bet on the prices of cryptocurrencies, oil, traditional stocks and even unlisted private companies, with leverage up to 40x.

Neil McDonald, CEO of Moomoo US, describes its user base as a “24-hour crypto trading community seeking intense volatility,” stating:

People are pursuing highly volatile markets.

According to CoinDesk Data, since its launch in 2023, WTI and Brent oil contracts have accounted for nearly half of Hyperliquid's total trading volume. Silver futures and Nasdaq 100 index futures follow close behind.

This structure shows that during recent market turbulence, users’ speculative demand for real assets, not just crypto tokens, is equally strong.

The Iran war as catalyst

Hyperliquid was little known outside the crypto circle until the outbreak of the Iran war changed the landscape.

As energy markets experienced extreme volatility, large numbers of traders rushed to bet on energy prices after workday trading hours and during weekends, leading to a surge in Hyperliquid’s oil-pegged contract trading volume.

Piper Sandler senior research analyst Patrick Moley noted:

The weekend trading during the early stages of the Iran war clearly exposed the structural gap in traditional markets.

This boom brought considerable profits to Hyperliquid. The platform’s revenue for 2025 reached about $960 million, with fewer than ten employees, including founder Jeff Yan.

Jeff Yan previously worked for high-frequency trading firm Hudson River Trading.

Hyperliquid’s native token HYPE has accumulated gains of nearly 70% over the past year, a sharp contrast to mainstream cryptocurrencies which have struggled to recover since their steep drop in October last year.

Regulatory gap and user circumvention

As a decentralized platform, Hyperliquid does not comply with mainstream "Know Your Customer" (KYC) and anti-money laundering (AML) regulations and, legally, U.S. users are not allowed to access its exchange.

However, regulatory barriers have not truly blocked users.

Just like offshore prediction markets such as Polymarket, large numbers of U.S. users easily bypass geographic restrictions and continue trading using VPNs and other location-masking tools.

Hyperliquid’s rapid growth has attracted close attention from traditional exchanges and regulators.

Paul Howard, senior director at crypto market maker Wincent, stated that Hyperliquid "is one of the biggest challengers to the entire infrastructure," adding, “Investor protection there is weaker, which precisely appeals to some people.”

Traditional giants accelerate their entry

Faced with the rise of the perpetual contract market, traditional exchanges are rushing to catch up.

Last week, Intercontinental Exchange (ICE), parent company of the New York Stock Exchange, announced it will partner with crypto group OKX to launch oil perpetual futures contracts in Europe and Asia.

ICE CEO Jeff Sprecher admitted at an industry conference this month:

This is a warning to the entire industry. Although most of these offshore exchanges are unregulated overseas entities and our clients cannot even trade on these platforms… everyone is watching closely.

OKX Chief Marketing Officer Haider Rafique commented:

For traditionally regulated institutions burdened by compliance, when a small company breaks through guerrilla-style and says we’ll offer a regulated version, it makes perfect sense.

He also warned:

If Hyperliquid goes wrong, the impact will ripple throughout the industry and Wall Street. If there’s sudden volatility or a settlement failure, it could instantly cause tens of billions in losses—this risk is obvious.

Hyperliquid: “We are the better product”

Amid mounting competitive pressure, Hyperliquid is not backing down.

This February, the company spent $29 million to set up a policy center, hiring a group of lobbyists to actively promote its policy agenda in Washington.

Bob Diamond, former head of Barclays and now chairman of Hyperliquid Strategies (a listed company investing in HYPE tokens), countered that the concerns of traditional exchanges are “groundless,” stating:

Perpetual contracts are actually a superior product for non-professional investors, so these traditional venues of course are striving to protect their market share.

As for allegations of possible price manipulation at Hyperliquid, he flatly dismissed them as “nonsense.”

Diamond revealed he is optimistic about the company’s recent meetings in Washington with regulators and politicians, along with its allies.

Earlier this month, founder Jeff Yan posted on X, expressing hope to “push forward the realization of legal access for U.S. users to Hyperliquid.”

Risk warning and disclaimerMarkets involve risk, and investment requires caution. This article does not constitute personal investment advice and does not consider the specific investment objectives, financial situation, or needs of individual users. Users should assess whether any opinions, viewpoints, or conclusions in this article suit their particular circumstances. Investments made accordingly are at your own risk.