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CME CEO flags potential IRS tax uncertainty for U.S. perpetual futures
Duffy warned that a court outcome could determine whether perpetual futures are treated as swaps, potentially shifting tax reporting from Section 1256 capital-gains rules to ordinary taxation.
CME Group Chairman and CEO Terry Duffy said an overlooked tax issue could emerge as U.S. perpetual futures trading expands, particularly if a pending court dispute ultimately leads regulators to treat the contracts as swaps rather than futures, according to CoinDesk.
Duffy said the ambiguity is tied to whether perpetual futures meet the legal definition of swaps because long and short positions periodically exchange funding payments. Per CoinDesk, he argued those recurring payment exchanges align with U.S. swap definitions, while the CFTC categorizes the products as futures.
The comments come as CME continues a legal challenge against the CFTC over its approval of perpetual futures in the U.S., and both sides await a federal court decision. CoinDesk reports the decision could shape how the U.S. approaches the rapidly growing perpetual futures market, including tax treatment.
Duffy said if perpetual contracts are ultimately classified as futures, many institutional traders could qualify for the blended tax treatment under Section 1256, where gains and losses are generally taxed as 60% long-term and 40% short-term capital gains. If the contracts are treated as swaps instead, he warned they would be taxed under ordinary rules, and because the products are relatively new, the IRS has not issued specific guidance for perpetual futures.