Ondo urges U.S. regulators to allow equity perpetual contracts

Ondo Finance has called on U.S. regulators to introduce perpetual contracts for individual stocks into China after its offshore platform accumulated trading volume of US$8 billion in about six weeks.

Overview

Ondo said existing U.S. securities and futures rules can cover perpetual contracts linked to individual stocks. Its Panamanian affiliates had processed US$8 billion in cumulative transaction volume as of August 14. The regular funding fee mechanism keeps the contract price close to the price of its underlying stock. The U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission are reviewing rules for on-chain derivatives and tokenized securities.

Ondo proposes regulatory application framework

Ondo Finance stated in three comment letters filed with the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission on August 24 that the two institutions can accommodate stock perpetual futures through the existing securities and futures framework. The company's proposal covers product classification, margin requirements and the use of on-chain market data. Ondo is not asking Congress or federal agencies to create separate regulatory categories, but instead wants the SEC and CFTC to apply existing rules already used for individual stock futures.

According to its product classification letter, the lack of a fixed maturity date does not prevent perpetual contracts from qualifying as securities and futures products. "There is nothing in the legal definition of securities and futures products that requires a fixed maturity date," Ondo said.

Capital fees can replace due settlement

Traditional futures expire on a fixed date, when the contract is settled based on the value of the underlying asset. Perpetual futures do not have a predetermined maturity date, but use regular funding charges to keep their market prices close to those of the assets they track. When the perpetual contract is traded at a price higher than the reference price, long positions usually pay fees to short positions. When the contract transaction price is lower than the reference price, the payment direction is in the opposite direction, thereby encouraging price convergence between the two.

Ondo told regulators that the funding mechanism functions similar to the settlement of futures contracts with maturity dates. According to its explanation, the economic structure of the product is more important than whether the contract terminates on the scheduled date. The document also covers an updated margin system and blockchain-based pricing data. Ondo believes regulators can consider these characteristics within the current legal framework, although the SEC and CFTC still need to decide how specific products meet listing, trading and investor protection requirements.

Simultaneous submission of similar proposals

On August 24, another similar request was submitted to both agencies. The Hyperliquid Policy Center proposes to treat equity perpetual contracts with futures characteristics as securities futures. The group said Hyperliquid's HIP-3 market had handled more than $480 billion in cumulative nominal transaction volume in the first 10 months. Under the proposal, regulators would first review the structure of contracts and how they are traded before considering the assets they track. Futures contracts linked to individual stocks will then be included in the securities futures system jointly managed by the SEC and CFTC. Securities and futures combine the characteristics of Securities Law and Futures Law. Designated contract markets regulated by the CFTC can list such products upon notification registration with the SEC, while national stock exchanges can register with the CFTC through parallel registration.

US$8 billion of offshore equity perpetual contracts have been processed

Through a Panamanian affiliate, Ondo has provided perpetual futures settled in stablecoins and referenced to U.S. listed stocks to eligible users outside the United States. According to the company's SEC filings, as of August 14, the platform had generated US$8 billion in cumulative trading volume. Ondo said the total was reached about six weeks after the product was launched. Many of the stocks referenced are mainly traded on U.S. exchanges, although U.S. users do not have access to these offshore contracts. The arrangement allows eligible non-U.S. traders to gain price exposure to individual stocks while settling positions using stablecoins rather than using traditional brokerage accounts. "Bringing this activity back to the United States should not be an open issue; it is something that both agencies should actively promote," the company said.

Ondo's request will not automatically authorize all stock perpetual contracts. Exchanges, brokers and clearing houses still need to comply with the registration, listing, margin and customer protection requirements applicable to securities and futures. Still, the proposal could provide U.S. investors with a regulated avenue to obtain products already available through offshore platforms. Whether U.S. investors can participate will depend on whether regulators accept Ondo's classification and decide how current securities and futures standards apply to perpetual contracts.

Ondo expands tokenized securities business

In addition to derivatives proposals, Ondo also operates one of the largest tokenized real-world asset businesses. RWA.xyz ranks the company fourth among RWA's governing bodies, with distributed assets valued at approximately $2.6 billion as of Wednesday. As of August 13, Ondo Stocks listed more than 440 tokenized stocks and exchange-traded funds on Ethereum, BNB Chain and Solana. According to previous reports on Ondo, the platform's reported asset value at the time was approximately $1.02 billion. The company said each tokenized security is backed by associated stocks, ETFs or cash held by a U.S. registered broker-dealer. Independent verification bodies check asset backing, while securities agents hold interests in collateral. Ondo's disclosure document states that buyers receive economic exposure to price changes and reinvested dividends after deducting applicable withholding taxes. The holder does not directly own the stock or ETF referenced, nor does it enjoy the same rights as registered shareholders.

In late July, Ondo obtained authorization from the U.S. Financial Industry Regulatory Agency for its U.S. tokenized equity business. The company said at the time that the total locked value of its tokenized products had exceeded $2.5 billion, while Ondo Stocks 'cumulative trading volume had exceeded $7 billion. Such tokenized products are different from the perpetual futures involved in the latest letter. Stock tokens provide indirect economic benefits backed by securities or cash, while perpetual futures are derivative contracts designed to track the price of a reference stock without transferring ownership.

SEC Harmonization with CFTC or Affect Access

Ondo's letter comes as federal agencies are reconsidering how securities and derivatives rules should apply to blockchain-based markets. In March, the SEC and the CFTC signed a memorandum of understanding to coordinate work in areas where their powers overlap. The agreement establishes a formal process for sharing information, developing policies, and resolving issues involving products that may be governed by both securities and commodity laws. Securities and futures require such coordination because the SEC regulates securities markets and the CFTC regulates U.S. futures and derivatives venues. As a result, perpetual contracts linked to individual stocks may require approval or supervision from both agencies.

Political attention has also begun to be paid to introducing offshore sustainable markets to the United States. U.S. President Donald Trump said in August that CFTC Chairman Michael Selig was committed to bringing Hyperliquid to the United States in a "fully compliant and legal manner." Neither the CFTC nor Hyperliquid publicly explained how access would work. Hyperliquid is known for its on-chain perpetual futures, with its HYPE token rising more than 20% after Trump's comments and nearly 49% in the following month, trading at about $81 on Wednesday, according to CoinGecko data.

Regulators are also individually reviewing the infrastructure needed to support tokenized securities. On Tuesday, the SEC proposed updating transfer agency rules to cover registration, record-keeping, transfer processing, cybersecurity, and security and client funds protection. Most existing transfer agency rules date back to the late 1970s and early 1980s, when paper certificates and manual ownership records were still common. Under the proposed rules, on-chain transfer agents need to have controls to protect digital records from unauthorized changes, deletions and operational failures. The SEC said the amendments would remain technology neutral and would not require companies to use blockchain systems. After the proposal is published in the Federal Register, a public comment period is 60 days, after which SEC staff may revise the text, before commissioners will consider the final rule.