CME Group’s Terry Duffy warns of tax risks for US perpetual futures

Terry Duffy has a bone to pick with perpetual futures, and he’s not being subtle about it. The CME Group CEO used remarks on July 22 to highlight what he considers a ticking time bomb buried inside the recent wave of US-listed perps: nobody seems to know how they’ll be taxed. The concern isn’t academic. How these instruments get classified, whether as futures or swaps, determines whether traders enjoy favorable capital gains treatment or get hit with ordinary income rates. That’s a meaningful difference for anyone trading size, and Duffy is arguing the CFTC greenlit these products without sorting out the answer first. The classification question that could cost traders real money Here’s the core issue. Traditional futures contracts in the US fall under Section 1256 of the tax code. That section offers a blended tax rate, treating 60% of gains as long-term capital gains and 40% as short-term, regardless of how long the position was held. Perpetual futures, though, don’t behave like traditional futures. They have no expiration date and no delivery mechanism. They’re contracts that let you bet on the price of something indefinitely, with a funding rate mechanism that keeps the contrac...