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Two regulators converged on the same market from opposite directions in February 2026.
The European Securities and Markets Authority warned that derivatives marketed as “perpetual futures” or “perpetual contracts” tied to Bitcoin and Ethereum likely fall within the scope of contracts-for-difference regulations, regardless of what firms call them.
Days earlier, US Commodity Futures Trading Commission (CFTC) Chairman Michael Selig announced his agency would use its tools to “onshore” perpetual and other novel derivative products with appropriate safeguards.
The stakes are enormous: if perpetual contracts account for roughly 60% to 90% of the $85.70 trillion in the centralized crypto derivatives market recorded in 2025, regulators are competing to determine where $51 trillion to $77 trillion in annual turnover is legally hosted.
The fight matters because perpetuals are where price discovery concentrates, fee capture accumulates, and liquidation flows cascade.
Centralized crypto derivatives trading hit $85.70 trillion in notional volume during 2025, with daily averages around $264.5 billion and a single-day peak of $748 billion on Oct. 10.
Binance alone processed $25.09 trillion, roughly 29.3% of the global total, and the top four venues captured 62.3% of all activity. Kaiko's analysis shows perpetuals accounted for 68% of all Bitcoin trading volume in 2025, up from 66% the year prior.
Whatever the precise share, perpetuals sit at the center of crypto's derivatives machine, and the regulatory frameworks governing them will determine which jurisdiction captures the clearing fees, custody relationships, and benchmark governance that anchor institutional trust.
Binance captured $25.09 trillion or 29.3% of the $85.70 trillion centralized crypto derivatives market in 2025, while the top four venues controlled 62.3% of total volume.Europe's substance test
ESMA's Feb. 24 statement reads like a polite preview of enforcement.
The regulator noted an increase in derivatives marketed as perpetual futures or contracts that provide leveraged exposure to crypto assets.
It also stated that such instruments are likely within the scope of national CFD product intervention measures mirroring ESMA's 2018 restrictions.
The assessment hinges on legal and economic function, not commercial naming.
ESMA explicitly dismissed common industry arguments: trading on a regulated venue doesn't exempt a product, funding rate mechanisms are irrelevant to classification, and voluntary protections such as insurance funds or negative balance protection don't change the outcome.
The practical bite comes from ESMA's CFD leverage ladder, which caps retail leverage on crypto-linked instruments at 2:1 and mandates margin close-out at 50% of the minimum required margin.
However, ESMA added a sleeper constraint: product governance obligations under MiFID II.
ESMA warned that mass marketing campaigns, such as pop-ups, blanket emails telling all clients “get started now,” are inconsistent with a narrow target market. Firms must assess appropriateness, tailor distribution strategies, and prepare a Key Information Document under PRIIPs for retail distribution.
The forward-looking implication is a squeeze on retail access from multiple angles. Even when a venue holds an EU license, perpetual-like products will face leverage caps, appropriateness tests, governance scrutiny, and marketing restrictions.
One Trading, an EU MiFID II-regulated platform offering cash-settled perpetual futures, demonstrates that the “regulated perps” pathway exists in Europe. Still, its phased rollout from institutions to eligible retail shows the compliance friction that ESMA now foregrounds.
Domesticating perpetuals into futures infrastructure
The CFTC's approach treats perpetuals not as exotic contraband but as widely used tools requiring common-sense safeguards.
Chairman Selig's Jan. 29 remarks positioned the agency to onshore perpetual contracts within existing regulatory architecture, and market structure already reflects that intent.
Coinbase Financial Markets launched CFTC-regulated perpetual futures for US customers in July 2025. The contracts have 5-year expirations, which is a “perpetual-style” structure that aligns with futures market conventions, and offer up to 10x intraday leverage.
CFTC filings reveal the plumbing beneath: Coinbase Derivatives' nano Bitcoin contract operates under designated contract market core principles, including surveillance, position limits, and disclosures, with clearing through Nodal Clear.
Cboe introduced a parallel design: long-dated, cash-settled Bitcoin and Ethereum continuous futures with daily cash-adjustment funding mechanisms and expiries up to 120 months.
The structure mimics the dynamics of perpetual contracts within a US-regulated futures framework.
Both products signal the US strategy: package perpetual exposure inside institutional-grade infrastructure where clearing, intermediated access, and benchmark governance address the CFTC's oversight priorities.
The leverage wedge between jurisdictions creates arbitrage pressure.
EU retail clients face 2:1 leverage on crypto-underlying CFDs, while Coinbase advertises up to 10x intraday leverage on its US perpetual-style futures. The gap matters to active traders who view leverage as a strategic tool, not a risk to be managed away.
Policy shifts that move even a few percentage points of market share carry economic weight measured in billions of dollars in annual fee revenue.
| Regulatory posture | Substance-over-form: label (“perpetual futures/contracts”) doesn’t matter; assess legal + economic substance. | Onshore framework: bring perpetual-style exposure into existing derivatives architecture with safeguards. |
| Product classification trigger | If it functions like a CFD (leveraged long/short exposure to price moves; typically cash-settled), it likely falls under national CFD product intervention measures—even if called “perpetual.” | If structured/listed as a regulated futures/continuous contract on a CFTC-regulated venue, it sits within DCM core principles + clearing/market oversight. |
| Retail leverage | 2:1 cap on crypto-linked CFD exposure for retail under the ESMA CFD intervention ladder (as mirrored by NCAs). | Coinbase markets up to 10x intraday leverage for its US “perpetual-style” futures (long-dated futures design). |
| Margin rule / close-out | 50% margin close-out rule (close positions when funds fall to 50% of required margin). | Margining primarily via exchange + clearing house rules (initial/maintenance margin), plus broker/FCM risk controls. |
| Distribution constraints | MiFID II product governance: narrow target market, appropriateness testing, conflict management; ESMA flags mass marketing (“get started now” pop-ups/emails) as inconsistent with narrow targeting. | Access is typically intermediated (FCM/broker model) with venue rules, surveillance, and suitability/controls mediated through regulated market participants. |
| Disclosure | PRIIPs: retail distribution requires a Key Information Document (KID) with risks/costs/scenarios, where applicable. | Futures disclosures/risk statements under the US futures regime (venue + intermediary disclosures; contract specs, risk warnings). |
| Anti-circumvention language | Explicit: circumvention of product intervention measures is prohibited; venue-trading, funding rates, or “insurance funds” don’t change classification. | Emphasis tends to be compliance-by-design: product structured to fit regulated futures standards (surveillance, limits, disclosures, clearing), rather than re-labeling to avoid rules. |
What a 5% shift means
A baseline scenario illustrates the stakes.
If US-regulated perpetual-style products and clearer CFTC pathways shift 5% to 10% of global perpetual turnover onshore over 12 to 24 months, primarily from offshore centralized exchanges, the volume captured would range from roughly $2.57 trillion to $6.86 trillion in annual turnover.
At an effective take rate of two basis points, that translates to approximately $514 million to $1.37 billion in gross trading fees annually.
Onshoring succeeds when regulatory clarity combines with better user experience, credible benchmarks, and capital efficiency, not merely legal permission to operate.
The EU faces a different equation. If ESMA-style enforcement and marketing appropriateness pressure materially narrow retail distribution, European retail leverage demand either fades or routes to non-EU offshore venues or decentralized finance platforms.
Europe might host fewer trades while pushing higher compliance certainty for institutional products, effectively ceding retail market share to other jurisdictions.
A third scenario considers volatility-driven fragmentation.
If macro volatility and liquidation cascades keep demand for high leverage elevated while compliance friction slows the onshore ramp, regulated venues grow. Still, offshore and decentralized exchange perpetuals remain the marginal price-setter.
Kaiko's 2026 analysis already noted that perpetual DEXs were steadily gaining market share, suggesting that leverage demand will route around centralized compliance when possible.
A 5% to 10% shift in perpetual futures volume to US-regulated venues would capture $2.57 trillion to $6.86 trillion in annual turnover, generating $514 million to $1.37 billion in gross trading fees at a two basis point effective rate.Watching the enforcement signals
The near-term tells are enforcement mechanics and product launches.
In Europe, investors should watch whether national competent authorities begin treating specific perpetual offerings as CFDs, forcing 2:1 leverage on crypto underlyings, mandatory risk warnings, and incentive bans.
Large EU-facing venues and brokers may change marketing funnels, such as cutting pop-ups, emails, and affiliate incentives, to align with narrow target-market obligations.
In the US, concrete signals include CFTC rule proposals or interpretations expanding true perpetual availability beyond today's long-dated futures designs. New contract listings, market-maker programs, and clearing integrations will telegraph the pace of build-out.
Cboe's continuous futures adoption indicates whether traditional finance distribution channels can absorb perpetual-like demand without resorting to offshore workarounds.
The macro overlay matters. CoinGlass identified derivatives as the core battlefield during market accelerations, and if 2026 volatility persists, regulators will treat perpetuals as systemically important market structures rather than niche products.
Open interest, a proxy for system leverage, ranged from a 2025 low of $87 billion to a peak of $235.9 billion on Oct. 7, ending the year at $145.1 billion, up 17% from the start.
Defaults, distribution, and control
The perpetuals war is fundamentally about defaults.
Retail traders default to venues offering the highest leverage with the lowest friction. Institutional capital defaults to venues offering clearing certainty, benchmark integrity, and regulatory predictability.
Europe's substance-over-form approach narrows retail distribution while preserving institutional pathways under MiFID II obligations.
The US onshoring strategy embeds perpetuals into futures market plumbing, betting that compliance infrastructure can coexist with competitive leverage offerings.
ESMA's warning that commercial names are irrelevant and circumvention is prohibited signals that enforcement will follow.
The CFTC's commitment to onshore perpetuals with common-sense safeguards signals infrastructure build-out will continue.
In between sits a $51 trillion to $77 trillion market where price discovery, fee revenue, and benchmark governance remain up for grabs.
The jurisdictions that balance leverage access with clearing credibility will host the next cycle's derivatives machine.
11The rest will watch liquidity migrate, either to regulated competitors or to decentralized venues where leverage caps and appropriateness tests don't apply.
