There's an old trader saying: "Don't put on a position that won't let you sleep at night."

Perpetual futures, known as "perps" in short, are literally designed to do the opposite.

Blockchain-enabled, 24/7-traded, never-expiring 'futures' – a label now legally contested by the Chicago Mercantile Exchange – are growing so fast overseas that they almost stole the show for the biggest IPO of all time and knocked $18 billion off the combined market values of the CME Group, Cboe Global Markets, the Intercontinental Exchange and Miami International Holdings in two days.

Investors are worried perps will disrupt the business model of the traditional exchanges, which make a substantial amount of money off the so-called roll in derivatives, where traders extend the life of an expiring contract by selling a near-dated contract to buy a longer-dated one. Perpetuals never expire, negating the need to roll contracts and depriving exchanges of a lucrative revenue stream. While the initial approval of perpetual futures trading in the U.S. has been limited to cryptocurrencies, the president's comments this week suggest regulated perp trading may soon be available on traditional asset classes like stocks and commodities, which are booming in popularity on Hyperliquid this year.

"Traditional exchange economics could be in question," said one current board member of a publicly-traded exchange who requested to remain anonymous. "Perpetual futures, zero-DTE expansion, extending trading – they're all responses to an increasingly competitive market where investors expect continuing access."

Brokers and exchanges have extended trading hours for several years now. Charles Schwab's TD Ameritrade pioneered "24/5" trading in 2018, the London Stock Exchange will join next year, and now most brokers, along with Cboe, offer trading in major securities including index options in some form on all but Saturdays and Sundays. The advent of monthly, then weekly, and eventually same-day options expiry also expanded the calendar from the inside-out. In that context, perpetual futures, borne of crypto origins – an asset class whose appeal stemmed in large part due to constant access – look like a natural next step.

While most popular with retail investors, perpetuals are seeing signs of increased attention from institutional investors as well.

"While this is a heavily retail-centered product, there is already some institutional activity," said Ram Vittal, CEO of market-maker Marex Group, whose shares are up 80%-plus this year. Marex covers perpetual futures with other underlying assets globally and has begun issuing crypto perps in London. "Marex is happy to expand that offering to U.S. regulated venues, regardless of the underlying, to support clients' needs," Vittal added.

It's hard not to see Hyperliquid's perps exchange as one of the most compelling use-cases of blockchain to-date. Activity on the exchange is powered by HYPE, a crypto token whose value is in part derived by fees collected from transactions. HYPE is up 196% this year and is a key holding in S&P's new Pantera Digital Asset Index tracking revenue-generating crypto projects.

Given Hyperliquid's success – averaging $9.6 billion in perpetual notional volume on a daily basis in June – many major incumbent players are already laying the groundwork for related styles of derivatives trading. Robinhood Markets offers crypto perpetuals to European customers, and Cboe late last year launched 120-month-to-expiry "continuous futures."

The selloff in exchange stocks has execs in Chicago and New York scratching their heads, according to on and off-the-record conversations with executives. That's particularly the case at Cboe, where options are synonymous with risk management, not risk-taking, and expiration is the primary feature – not bug – that allows both big and small investors to define their risk. Even in the zero-day-expiry market, more than 90% of trades are done with capped risk, according to data provided by the exchange.

"Perps as a replacement to options is where it breaks down for me," Rob Hocking, Cboe's global head of derivatives, said in an interview. "Zero-DTE options offer asymmetric payouts that can be infinite and almost all the time, the most customers can lose is their option premium."

It's a sentiment echoed by tech-derivatives powerhouse Nasdaq, though for both Nasdaq and NYSE-owner ICE, perpetual futures pose a separate quandary: how will the IPO and listings businesses change in a world where private companies can now find significant liquidity and price discovery online?

Hyperliquid's perps shined by many measures in the lead-up to SpaceX's $1.8-trillion Nasdaq IPO. More than 7 million SpaceX perps worth $1.2 billion traded on Hyperliquid the day of the listing, eventually trading SpaceX perps just dollars away from where the first stock transacted at $150. Trading in stock perps like SpaceX and SK Hynix exploded this year, as TradeXYZ volume grew to just under $500 billion thanks to popularity of "real-world" assets, according to Patrick Moley, senior research analyst at Piper Sandler.

"Some of the appeal in perps is the 24/7 nature," said Stephen O'Connor, vice president of U.S. options analytics and product innovation at Nasdaq. "To get to true price discovery, though, you need the liquidity our listed markets provide."

"We are not taking this lightly," said Duffy on CNBC shortly before filing the suit.

It's a crucial first legal battle for the asset class, as swaps and futures carry very different regulatory implications for how much capital the institutions listing and trading them need to have set aside for margin, risk, and tax requirements. CFTC has called the suit "frivolous."

There's also major ramifications for the exchange-traded-fund industry, where issuers have been turning to the swaps market for custom products that are facilitating the explosive growth of leveraged ETFs. If ETF issuers can use perps instead, it could reduce their costs, and revenues for swap dealers that are mostly banks.

The Commodities Exchange Act of 1936 uses the phrase "contracts of sale of a commodity for future delivery" when describing futures contracts -- ostensibly in opposition to some of the defining characteristics of perpetuals that never expire or deliver an underlying asset. The Dodd-Frank Act of 2010 separates the two such that an instrument defined as a future cannot be a swap, meaning if perps were classified as swaps, it would pose notably more onerous capital requirements on Kalshi and Polymarket, which operate their own clearinghouses.

"We disagree on that [swap] characterization," Diana Elisabeth, head of communications for Kalshi, said in an email. "CME's lawsuit isn't about the law, it's about the fear of competition. With perps, you pay fees once, and exit the position whenever you choose. The end result is a cheaper, simpler product for the end consumer."

The CFTC declined to comment on the litigation.

One outcome that looks possible is a form of hybridization between incumbent and crypto exchanges that issue perpetuals.

In March, NYSE-owner ICE announced a $200 million investment into international crypto exchange OKX, valuing the business at $25 billion in a 50-50 joint venture called OKXICE to launch tokenized equities and crypto futures. OKX offers stock perpetuals it describes as "swaps" on Mag-7 stocks.

Similarly, Eurex owner Deutsche Borse Group entered into a partnership with crypto exchange Kraken last year and expanded its relationship with a $200 million stake in the Kraken operator Payward. Kraken offers perps on a variety of products with up to 50x leverage.

"This is probably the most exciting time to be in the futures industry since the inception of financial contracts in the 70s," said one senior executive at a major futures clearinghouse who asked to remain anonymous on statements that could be viewed as critical of regulators. "Competition brings out new products, lower prices, and the CFTC is trying to accommodate these disruptors. Definitions should be clear, and some of this may currently be pushing the envelope."