FalconX asks SEC to treat single-stock DeFi perpetuals as swaps

FalconX Bravo filed a request with the SEC and CFTC on Aug. 12 asking that cash-settled perpetual contracts tied to a single security or a narrow-based security index be treated as security-based swaps under SEC rules when they fall outside the joint SEC–CFTC security-futures framework. The agencies closed public comments on Aug. 24.

The filing covers contracts offered through decentralized finance protocols as well as bilateral over-the-counter trades, eligible electronic venues and non-U.S. trading platforms. It excludes Bitcoin perpetuals and broader categories of crypto perpetuals.

The filing notes that a contract that qualifies as a security-futures product and is listed on a market authorized by both agencies would remain subject to the joint SEC–CFTC regime. That path would preserve listing requirements the agencies impose, including protections for the underlying security or index, clearing and margin rules, position limits, surveillance and trading halts.

Where a contract does not meet the joint-listing test, FalconX asked the SEC to treat it as a security-based swap. Under SEC treatment, affected dealers could face registration, business-conduct standards, transaction-reporting, capital and margin requirements, and segregation obligations. Trading venues that list or execute such contracts could fall under the SEC’s security-based swap execution framework depending on their structure and any applicable execution or clearing mandates.

The filing notes that dealer status and other duties would depend on the participant’s role and the particular transactions, so classification would not automatically require every protocol developer or retail trader to register.

FalconX also requested an amendment to SEC Rule 18a-10 to raise the combined-notional threshold for alternative compliance from 10% to 49%, while keeping the fixed-dollar cap, SEC registration and oversight, and requirements not covered by the relief.

Regulatory context includes a CFTC policy statement in June that reserved several asset classes for further review and identified equity and narrow-index products as distinct jurisdictional questions. An independent researcher, Amadeus Brandes, filed a comment on Aug. 21 recommending the existing mixed-swap process rather than reclassifying these contracts and proposing measures to address insider information, market manipulation, leverage and funding-rate risks.

The agencies are considering FalconX’s listed-versus-unlisted test alongside alternative proposals. Closing the docket does not change jurisdictional rules, authorize particular products or commit either regulator to rulemaking.

The filing frames how SEC rules could apply to cash-settled perpetuals tied to equities and narrow indexes offered in crypto markets and through decentralized protocols, and it sets out regulatory and compliance questions that dealers, trading venues and DeFi developers would need to address if the SEC adopts the requested treatment.