Wall Street Veteran Calls Regulators' Understanding of Perpetual Futures Completely Wrong, Describing Them as Futures Contracts Without an Expiry Date

July 29th. DRW founder and CEO Don Wilson published an article to clarify the market's widespread misunderstanding of perpetual futures. He pointed out that perpetual futures are essentially futures contracts with no expiration date, nothing more. The various impressions formed by the current market about perpetual contracts—high leverage, auto-deleveraging, 24/7 trading, continuous margin settlement, etc.—are not inherent attributes of the contract itself, but rather product design choices made by crypto exchanges using digital collateral and real-time margin calculation.

Wilson explicitly stated his dislike for the ADL mechanism, emphasizing that "there is no reason to use it on perpetual contracts," and proposed that the true innovative value of perpetual contracts is that investors do not need to constantly roll positions, thereby significantly reducing trading costs, minimizing market impact and roll slippage, allowing positions to better track the front end of the futures curve.

In response to the current U.S. regulatory discussion on whether perpetual contracts should be classified as futures or swaps, Wilson urged regulatory agencies to determine based on economic substance—"There is no reason to treat it as a swap just because it has no expiration date. Economically, it is a future." He called for the wider application of perpetual futures in various markets such as commodities, securities, and crypto assets as tools for price discovery and risk management, rather than labeling them as crypto-specific high-risk gambling products.

The current U.S. market's interest in introducing perpetual contracts to regulated platforms continues to grow, with various parties still debating their legal classification. Wilson's statement provides a clear position from a seasoned market participant in this regulatory game.