Kalshi challenges CME to launch the United States 'first never-expiring crude oil futures

Although the product itself is designed to track West Texas Intermediate (WTI), the real focus is on its structural design. Traders do not have to roll over constantly to maintain the same crude oil position. The Commodity Futures Trading Commission (CFTC) currently has 45 days to decide whether the experiment should be included in the regulated U.S. commodity trading system.

Kalshi wants a crude oil trade to last almost forever

Typical crude oil futures have calendar attributes. After a trader buys an exposure, as the contract approaches its expiration date, any trader who wishes to continue holding a position needs to roll it over to the next month. Such rollover operations often appear boring until funds begin to drain off due to transaction costs, price differences and poor trading timing.

In fact, Kalshi asked the question: Why do we have to repeat it every few weeks or months?

The company's proposed contract would keep a position lasting for ten years while using a funding strategy that pegs prices to the WTI market. For investors with long-term exposure to crude oil, this could mean a simpler mechanism. Not only do they not need to extend contracts frequently, they also reduce the risk of a misoperation leading to physical delivery in Cushing, Okla. -not where traders intend to receive barrels of crude oil.

The company also believes that a single long-term contract helps concentrate trading activity in one place rather than spreading liquidity over a series of long maturities.

The idea came at a fairly convenient moment.

The turmoil in Iran has made crude oil one of the most aggressively traded macro assets this year. As geopolitical news continues to stir prices, hedge funds, institutional and individual traders are chasing fluctuations in energy markets. Since January, WTI futures have fluctuated in a range of about $60 per barrel, an environment where traders are starting to focus more on execution efficiency, rollover costs and tool flexibility.

The contract will be traded 24/7 from Monday to Friday. Although contracts are not truly "permanent", a ten-year term is enough for ordinary traders to ignore the difference in regular trading.

However, there is a problem: regulators cannot treat it as an ordinary exchange-listed product.

Derivatives with a sustainable nature are subject to greater scrutiny, so Kalshi cannot self-certify the contract as other exchanges handle other products. The CFTC must independently review the value of its application.

CME withdraws, while Kalshi continues to push forward

The filing comes at a time when the Chicago Mercantile Exchange Group is facing a bad time, which recently abandoned attempts to change crude oil trading rules.

CME had developed an early version of the contract that allowed trading 24 hours a day, seven days a week. But the proposal met with strong opposition from the oil industry and regulators.

The core of the controversy is not just whether traders want to trade crude oil futures on Saturday. The physical crude oil market uses benchmark prices for pricing, and it is unclear whether uninterrupted trading can remain in line with reality. The CFTC initially blocked the plan, sparking months of debate before the CME finally shelved it.

Kalshi took a different path. Its markets will stop trading over the weekend, but the contract itself will hardly expire.

There is also a historical connection between the two companies. CME executives have criticized perpetual futures and sued the CFTC earlier this year over its decision to allow Kalshi to provide similar broad derivative concepts linked to cryptocurrencies.

Oil is not the only regulatory battlefield Kalshi faces.

Ohio, 38 other states and Washington, D.C., have petitioned the U.S. Supreme Court to hear another separate challenge involving Kalshi's sporting event contract. In an Oct. 7 filing, Ohio supported New Jersey in Flaherty v. KalshiEX, LLC. Case No. 26-299.

The core issue is whether sporting event contracts meet the definition of a swap contract under the Commodity Exchange Act; if so, whether the application of federal commodity laws will override state gambling laws.

In the 3rd Circuit Court of Appeals, Kalshi won the case and the sporting event contract was found to be a swap contract under federal jurisdiction. The Ninth Circuit Court of Appeals ruled against Kalshi, holding that the application of Nevada's gaming laws remained unchanged. The Sixth Circuit Court of Appeals also disagreed with the view that federal commodity laws take precedence over state gambling laws.

Other similar challenges remain pending before the Second, Fourth, Seventh, Eighth and Tenth Circuit Courts of Appeals, as well as the Massachusetts Supreme Judicial Court.