Kalshi has been granted permission to launch perpetual futures contracts for gold and silver, competing with traditional exchanges for business.

Prediction market platform Kalshi is extending its reach from cryptocurrencies to precious metals, further increasing the pressure on traditional futures exchanges.

According to a CNBC report on September 10, Kalshi has received approval from the U.S. Commodity Futures Trading Commission (CFTC) to officially launch perpetual futures contracts for gold and silver on Thursday. This is the platform's first approved non-cryptocurrency perpetual futures product, following cryptocurrencies.

The application was initially submitted in July, and the CFTC completed its approval this week.

Udesh Jha, chief risk officer at Kalshi Klear, the clearing house, said the choice of precious metals as the next perpetual futures underlying asset stemmed from strong market demand for the asset class. "Metals, especially gold and silver, have a story to tell because of inflation," he said.

Perpetual futures ("perps") are futures contracts with no expiration date. Investors do not need to hold the underlying asset itself; the contract is pegged to the market price through a funding rate mechanism. This product type has long been active on unregulated overseas cryptocurrency exchanges. Kalshi's introduction of it to the regulated US market marks the first compliant implementation of this product in the United States.

Cryptocurrency prototypes, precious metals follow suit

Kalshi received approval in late May of this year to launch cryptocurrency perpetual futures, bringing this asset class, which previously had an annual trading volume of $90 trillion, to the regulated U.S. market for the first time.

To date, the notional trading volume of cryptocurrency perpetual futures contracts has reached $44 billion.

The demand for precious metals is also supported by data. Kalshi's commodity event contracts, which cover metals and oil, have seen trading volume exceed $400 million in seven months—while cryptocurrency event contracts took 14 months to reach the same milestone, twice as long as precious metals.

Traditional exchanges are under pressure as CME sues the CFTC.

The advancement of perpetual futures has directly impacted the existing structure of traditional futures exchanges.

Since the launch of Kalshi perpetual futures, the share prices of both CBOE and CME Group have fallen, with the market worried that this new type of contract will erode the business model of traditional exchanges.

CME has gone a step further by filing a lawsuit against the CFTC, alleging that the regulator acted improperly in approving perpetual futures and attempting to use legal means to prevent the expansion of such products in the United States.

Udesh Jha attributed Kalshi's competitive advantage to its compliance. "It all comes down to being a regulated platform," he said. "Doing things the right way, having robust risk controls… unregulated platforms will always hit a ceiling."

In addition to gold and silver, Kalshi applied in August to launch perpetual futures contracts linked to US stocks, industrial metal copper, and foreign exchange, which are currently pending CFTC approval.

Risk Warning and DisclaimerInvesting involves risk; please exercise caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situation, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are suitable for their specific circumstances. Any investment decisions made based on this information are at your own risk.