Regulators warn of retail risks, cryptocurrency perpetual contracts are under review again

Retail investors push the trading volume of cryptocurrency perpetual futures to a record high, and consumer rights organizations quietly shape the regulatory framework

As retail investors are pouring into the cryptocurrency perpetual futures market with unprecedented trading volume, Consumer rights organizations are quietly promoting the construction of a regulatory framework for this high-risk product. These organizations do not just exert influence by lobbying Congress, but are deeply involved in the regulatory process by submitting opinion letters, submitting court briefs, and pushing regulators to impose stricter restrictions on industries before rules are finalized.

One of the most active groups is Better Markets, a Washington-based non-profit organization led by Dennis Kelleher, a former lawyer at Starton Law Firm. According to its official website, the organization has submitted more than 500 opinion letters to financial regulators and self-regulatory organizations, and its recommendations have been cited more than 180 times in the final rules. In addition, the group regularly submits court briefs in support of stricter financial regulation.

How rights groups "write" rules

Better Markets has been trying to become a check and balance on Wall Street in the policy-making process by reaching out to the White House, Congress and federal regulators. One of its recent actions was to submit an opinion letter in July 2026 opposing a proposal by the National Credit Union Administration on cryptocurrency-related risks. Christopher Appel, head of banking policy at the organization, pointed out that the proposal could expose credit unions to cryptocurrency risks without adequate safeguards.

Christopher Appel said: "The National Credit Union Administration's Genius Act stablecoin proposal repeats the same mistakes that Better Markets has pointed out in the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, and the Treasury Department's stablecoin proposals-there are no substantive capital or liquidity standards, insufficient reserve diversification requirements, and failure to address the significant financial stability risks posed by stablecoins." Although the letter does not directly address perpetual futures, it demonstrates how rights groups are promoting regulation before the rules are introduced.

Advocacy groups can influence the wording of federal regulations through formal opinions, litigation, and ongoing communication with relevant authorities. Early regulation may be particularly effective for cryptocurrency perpetual futures, which are still largely outside the direct supervision of U.S. regulators.

Why regulators are concerned about the perpetual futures boom

As perpetual futures trading has become one of the most important sectors of the cryptocurrency market, regulators have begun to pay close attention. According to the definition of chain analysis firm Chainalysis, perpetual futures are derivatives with no expiration date. Traders can hold leveraged positions indefinitely through a funds rate mechanism, which ensures that contract prices are consistent with the spot market.

Research from Cornell University shows that approximately 93% of transactions in the cryptocurrency derivatives space involve perpetual futures. According to venture capital firm a16z, the trading volume of perpetual futures on centralized exchanges reached US$86.2 trillion last year (a year-on-year increase of 47%), and the trading volume on decentralized exchanges was US$6.7 trillion (a year-on-year increase of 346%). The Financial Times has called perpetual futures "the most dangerous product among cryptocurrencies," reflecting growing concerns about the potential risks faced by retail investors.

What are the retail risks?

Consumer advocates believe that the main risks of cryptocurrency perpetual futures include:

High leverage: Some platforms allow leverage up to 100 times, which means that an unfavorable price fluctuation of 1% may cause the entire margin position to be zeroed.

All-day trading: Unlike traditional futures markets, cryptocurrency perpetual contracts continue to be traded, increasing the risk of losses overnight or over the weekend when traders are unable to proactively monitor positions.

Automatic forced closing: Once margin requirements are exceeded, positions are automatically forced to close, usually not giving traders time to raise margin when the market fluctuates violently.

Funding fee costs: Since perpetual futures have no expiration date, traders need to pay or collect funding fees regularly to keep the contract price in line with the spot market. These recurring costs can significantly reduce earnings or increase losses, especially if positions are held for long periods of time.

Many trading platforms offer leverage of 1 to 100 times or more. Chainalysis said that during periods of rapid price fluctuations, highly leveraged positions can be forcibly closed within seconds, causing traders to lose large amounts of money. The Cornell University team also found that although the introduction of perpetual futures has increased market liquidity, the combination of a fund-rate mechanism and extensive use of leverage will increase transaction costs over time. Equity advocates have previously expressed concerns that the combination of high-leverage, all-weather trading and automatic forced closing systems could cause retail investors to quickly erase their positions before taking any action.

Why U.S. regulation is pending

How perpetual futures should be regulated remains an issue that needs to be discussed. Chainalysis pointed out that most perpetual futures trading takes place on offshore exchanges that are not subject to U.S. regulators. On the other hand, a16z stated that neither centralized nor decentralized platforms allow U.S. customers to use actual perpetual futures products. This means that while trading volumes continue to grow, the U.S. Commodity Futures Trading Commission has limited powers to implement regulations.

The concept of this product is not new. Economist Robert Schiller first proposed this idea in 1993, and BitMEX promoted the popularization of cryptocurrency perpetual futures in 2016. However, the regulatory environment has not adjusted accordingly. As retail participation increases and real-world asset (RWA) perpetual futures account for 44% of trading volume on exchanges such as Hyperliquid, the mismatch between where these assets are traded and regulatory jurisdiction has become increasingly difficult to ignore-a gap that consumer advocates are trying to fill.

This combination of leverage, ongoing trading, automatic forced liquidation, and ongoing funding rates makes perpetual futures one of the most controversial products in the cryptocurrency derivatives market. Consumer advocates believe that many retail investors may not fully understand the risks before trading.