CME warns U.S. bitcoin perpetual raises unresolved tax question
The CFTC approved a bitcoin perpetual as a futures contract, but CME argues the product operates more like a swap. That dispute could affect how gains and losses are reported under federal tax rules.
The CFTC's decision to approve a bitcoin perpetual as a futures contract has raised a federal tax-classification question that regulators and courts have not specifically resolved, according to CME Group Chairman and CEO Terry Duffy.
Duffy told CoinDesk on Thursday that uncertainty over whether the product is legally a futures contract or a swap could leave traders and institutions unsure how to report it for federal tax purposes. His warning does not establish that any trader has filed incorrectly or owes additional tax.
The dispute follows the Commodity Futures Trading Commission's May decision to approve KalshiEX's BTCPERP contract. The contract references bitcoin's spot price but, unlike a conventional futures contract, has no expiration date. The CFTC reviewed it under its voluntary product-approval process and authorized Kalshi to list it as a futures contract.
CME is challenging that approval in federal court. In its complaint against the CFTC, the exchange alleges that perpetual contracts function as swaps because they exchange recurring funding payments tied to the underlying commodity, transfer price risk without conveying ownership, and lack a fixed delivery or expiration date.
The CFTC's order accepted Kalshi's contract-specific analysis that standardization, central clearing, an offset mechanism and other features supported treating BTCPERP as a futures contract. The agency said its analysis was limited to that contract and similarly structured perpetuals that reference digital commodities with deep, active and continuous spot markets.
CME is not a neutral party in the dispute. It operates one of the world's largest derivatives exchanges and is challenging the approval of a product offered through another regulated market. Its legal and commercial interest does not resolve the classification question.
Why the classification matters
Federal tax law gives qualifying Section 1256 contracts a distinct reporting framework. Under 26 U.S.C. Section 1256, covered contracts are generally marked to market at the end of the tax year, meaning they are treated as if sold for their fair market value.
The IRS's Publication 550 says gains and losses on Section 1256 contracts are generally divided into 60% long-term and 40% short-term capital gain or loss, regardless of how long the position was held. The publication lists regulated futures contracts among the instruments covered by Section 1256 and excludes several categories of swaps and similar agreements.
That does not answer how the new bitcoin perpetual should be treated. The CFTC approved BTCPERP as a futures contract under commodities law. That approval does not by itself establish that the product automatically receives Section 1256 tax treatment.
Duffy's position is that the product's recurring funding payments make it look like a swap despite the futures label. Rustin Diehl, a tax attorney and counselor at Allegis Law, told CoinDesk that perpetuals can resemble swaps in their legal structure while performing an economic role similar to futures. Jason Gottlieb, a partner and chair of Morrison Cohen's digital assets practice, told the publication that the statutory swap definition leaves substantial room for interpretation. Diehl also said the IRS is not necessarily bound by the CFTC's product classification.
A court ruling may not settle the tax question
CME has asked the court to set aside the CFTC's approval. The case could first turn on whether the agency adequately considered the record and explained its decision, rather than producing an immediate ruling on the definitive legal character of every perpetual contract.
Even a court decision may not settle the tax treatment. Separate guidance from the IRS or further litigation could still be required.
The CFTC expressly approved Kalshi's bitcoin perpetual as a futures contract, CME is contesting that classification, and IRS Publication 550 does not specifically say how the product should be reported.
The uncertainty matters for exchanges, brokers and market participants building around regulated U.S. perpetuals. It is not a determination about any individual taxpayer's liability, and readers should not treat the dispute as personalized tax advice.
