This hot new financial product has Wall Street spooked. What you should know before trying it out.

Over the past decade, perpetual futures have gone from a niche crypto product to generating billions of dollars a day in trading volume across a handful of offshore exchanges.

And as of this week, investors in the U.S. can trade them legally for the very first time.

Kalshi on Thursday launched trading in a handful of cryptocurrency perpetuals after first receiving permission from the Commodity Futures Trading Commission late last week, a Kalshi representative confirmed to MarketWatch. The futures will run on the Ethereum ETHUSD blockchain. Coinbase has also received permission to offer U.S. investors access to cryptocurrency perpetual futures traded on Deribit, an offshore exchange owned by Coinbase COIN that is regulated in Dubai.

Kalshi founder Luana Lopes Lara said in a post on X that Kalshi traded $100 million in perpetuals during its first day of activity.

The enthusiasm surrounding perpetuals and their arrival in the U.S. appears to be spooking shareholders of established derivatives exchanges. Shares of CME Group CME and Cboe Global Markets CBOE were on track Friday to tally a third straight week in the red, FactSet data showed.

There have been several attempts to bring “perps” or “perp-like” products to the U.S.; most notably, Coinbase offers perp-like futures contracts on its platform. But the contracts now trading on Kalshi represent the first bona fide perpetual futures available to be traded in the U.S.

“It’s a huge milestone,” said Kaledora Kiernan-Linn, co-founder and CEO of Ostium. “There’s been a lot of people talking about perps making their way into the U.S., but this is the first time there’s been real approval for a true perpetual instrument.” Ostium is a platform for trading perpetuals tied to commodities and other real-world assets that is currently only accessible outside the U.S.

These days, traders can bet on perpetual futures tied to cryptocurrencies, oil CL00 BRN00, gold GC00, the S&P 500 SPX and many other assets. So-called pre-IPO perpetuals tied to SpaceX SPCX and other hot, still private companies were launched on Hyperliquid and Binance last month. SpaceX is expected to make its market debut on June 12.

A surge of investor interest

During the early days of the Iran conflict, investors flocked to Hyperliquid, a decentralized exchange off-limits to most U.S. customers, to trade crude-oil perpetual futures over the weekend, while traditional futures markets were closed. Surging interest around the platform has caused the value of HYPE tokens, Hyperliquid’s native cryptocurrency, to surge. Several ETFs have launched over the past few weeks to accumulate the token.

Shares of Hyperliquid Strategies PURR, a digital-asset treasury company that holds HYPE tokens, have risen 175% in 2026, according to FactSet.

“Hyperliquid is running on a very efficient and cost-effective blockchain,” which has led to it processing billions in dollars of trading volume on a daily basis, said Eliézer Ndinga, global head of research at 21shares, in an interview. The decentralized exchange has become “a global phenomenon,” Ndinga said, even if it’s not available to U.S. investors for regulatory reasons.

Binance, a popular offshore crypto exchange, also offers perpetuals on both cryptocurrencies and real-world assets like oil, having launched the latter earlier this year, according to a statement shared with MarketWatch by a Binance representative.

Binance is a centralized exchange, as were other early leaders in the perpetuals space. But Hyperliquid — a decentralized platform — has seen its market share surge over the past six months, trading volume data show.

A new kind of casino?

A perpetual futures contract is a financial derivative, like an option contract or a traditional dated futures contract, that allows an investor to bet on or against an underlying asset — bitcoin BTCUSD, oil, the S&P 500 — using leverage.

Yale economist Robert Shiller has been widely credited with laying much of the theoretical groundwork for perpetual futures. But they were first popularized in their current form by Arthur Hayes at BitMEX, an early crypto exchange and derivative platform, according to several industry figures.

Unlike with traditional futures contracts used to trade things like oil and wheat W00, traders of perpetual contracts can select how much leverage they would like to apply, and how much money they would like to risk, on a given position. In traditional futures markets, exchanges control the amount of leverage via margin requirements and contract sizes.

Another key difference: As the name implies, perpetual futures never expire. Instead of abiding by existing trading hours for traditional derivatives exchanges, perpetual contracts trade 24 hours, seven days a week, with cash settlement occurring at regular intervals. Since perpetual futures never expire, investors don’t have the option of taking delivery of the underlying asset.

To prevent prices of perpetual futures from diverging too dramatically from the spot price of the underlying asset, perpetual futures traded on exchanges like Hyperliquid rely on a mechanism called funding rates. Investors who are long and those who are short pay one another to hold their positions. If the perpetual price is higher than the reference spot price, longs pay the shorts; if the price is lower than the reference spot price, shorts pay the longs. Funding rates help keep futures prices from diverging too far from reality, Ostium’s Kiernan-Linn said.

Greater liquidity, lower fees and more flexibility for traders give perpetual futures a leg up over other leveraged products popular with day traders, like leveraged ETFs, said David Nadig, president of ETF.com.

“For yolo hedge funds and degen day traders, perps are just a better mousetrap,” Nadig told MarketWatch in an email.

That being said, perpetual futures haven’t escaped criticism.

Terry Duffy, the chair and CEO of CME Group, said during an interview with CNBC that these products encourage reckless speculation while offering little utility for any trader looking to hedge the price of an underlying commodity.

“I don’t want casinos in exchanges. I want to have products that people need to trade,” Duffy said.

Due to the fact that they mostly run on crypto rails, a perpetual futures positions faces instant liquidation when margin requirements are violated. Duffy also flagged this as a potential risk.

“The auto-liquidation process that works for perpetuals — that could trip over, and then cause a cascading effect going down exponentially,” Duffy said during the interview. When asked for comment, a representative for CME Group referred MarketWatch to Duffy’s CNBC interview.

Financial derivatives traded on CME and Cboe platforms must compete with perpetual futures traded both offshore and in the U.S.

A representative for Cboe said the exchange didn’t view perpetual futures as a threat to its business.

“With respect to the CFTC’s recent approval of bitcoin perpetual futures, we do not view this as a meaningful risk to Cboe. Perpetual futures and options are fundamentally different,” the Cboe representative said in a statement shared with MarketWatch. “More broadly, competing against futures is not new for Cboe, and options have steadily been taking share from futures over time as investors gravitate towards the asymmetric upside potential and defined downside.”

A representative for the CFTC didn’t respond to a request for comment.