Kalshi seeks approval of first regulated U.S. oil contract

What are Kalshi's plans for the oil market?

Forecast market operator Kalshi is preparing to seek regulatory approval for its West Texas Intermediate Crude Oil (WTI) perpetual futures contract, which could introduce one of the most widely used derivative structures in cryptocurrency trading into the U.S. regulated energy market. The proposed contract could be submitted to the U.S. Commodity Futures Trading Commission (CFTC) as soon as next week. It will be traded 24 hours a day, five days a week, and unlike traditional oil futures, it has no expiration date. If approved, the product will become the first oil-linked perpetual futures contract to be listed on a regulated platform in the United States. This would provide traders with another way to continuously track crude oil prices without having to regularly close out expired contracts and move positions to later expiration months.

Perpetual futures (often referred to as "perpetual contracts") are derivatives that can be held indefinitely. They are particularly popular in the cryptocurrency market, where traders can maintain leveraged positions without processing fixed contract expiration dates. Applying the same structure to crude oil would be a major change to a market that has traditionally been built around term futures contracts and physical delivery schedules.

Why could the CFTC approve an oil perpetual contract?

Kalshi's proposal comes after the CFTC recently studied whether to allow extended trading hours in the U.S. derivatives market and introduced perpetual contracts linked to physical delivery or storable commodities. In June this year, the regulator sought public opinion on extending traditional futures markets to 24/7 trading and allowing perpetual contracts linked to energy commodities such as crude oil. The consultation suggests that regulators are at least considering whether futures structures developed mainly in digital asset markets can operate under existing U.S. commodity rules. However, approval is far from certain. In July, the CFTC suspended self-certification of a Chicago Mercantile Exchange Group product that would have been introduced to 24-hour crude oil futures trading while regulators reviewed whether the contract complied with federal commodity laws. The intervention shows that energy products with extended trading hours are still under strict scrutiny. Perpetual contracts may also raise additional issues related to pricing, settlement, market manipulation controls, and the relationship between derivatives and the underlying physical oil market.

Investor Points

Kalshi's proposal is more than just a new oil contract. If approved, it could open the door for perpetual futures structures to move from offshore cryptocurrency markets into regulated commodity trading in the United States, potentially changing the way investors maintain long-term exposure to assets such as crude oil.

Can perpetual futures expand beyond cryptocurrencies?

Interest in introducing perpetual futures into onshore markets is no longer limited to commodities. Ondo Finance submitted three letters to the U.S. Securities and Exchange Commission (SEC) and the CFTC on August 24, arguing that perpetual contracts linked to individual stocks can operate under the existing U.S. securities futures framework. The debate is important because perpetual contracts have historically been concentrated on offshore cryptocurrency exchanges, which account for the majority of derivatives trading. U.S. investors have far fewer opportunities to gain such structures through regulated platforms. If regulators establish an acceptable framework for oil perpetual contracts, exchanges may eventually seek similar products linked to other commodities, stocks or financial instruments. The appeal to traders is simple: Continued exposure eliminates the operational need to roll over a position from an expiring contract to the next contract. For exchanges, perpetual products can also concentrate liquidity into one continuously traded contract, rather than spreading activity over several maturity months. If regulators are satisfied with their risk control, this structure may be commercially attractive.

Why is Kalshi's legal battle still important?

The oil contract proposal comes as Kalshi is engaged in another legal battle over the scope of federal and state governments 'authority to forecast market products. A Michigan court issued a preliminary injunction on Tuesday barring Kalshi from offering contracts for sports-related events in the state. The order also requires the company to maintain geofences to prevent Michigan residents from accessing those contracts. Subsequently, New Jersey asked the U.S. Supreme Court on Wednesday to resolve the issue of whether federal commodity laws prevent states from extending application of gambling laws to event contracts traded on CFTC regulated exchanges. Federal appeals courts have reached conflicting conclusions in cases involving New Jersey and Nevada. The controversy does not directly determine whether Kalshi can list oil futures contracts, but it will affect its broader regulatory strategy. Kalshi's business is based on operating through the federal commodities framework, arguing that contracts regulated by the CFTC should not be subject to separate state gambling restrictions. An approved WTI perpetual contract will allow Kalshi to move further beyond the prediction market and enter deeper into traditional derivatives. It will also test whether U.S. regulators are prepared to introduce trading structures pioneered in the cryptocurrency space into tightly regulated commodity markets, rather than leaving most perpetual contracts in offshore markets.