Ondo urges SEC, CFTC to bring US stock perpetuals onshore
Source Entity
Cointelegraph by Nate Kostar
Ondo Finance is lobbying US regulators to authorize onshore perpetual futures tied to individual stocks. They argue that existing securities frameworks are sufficient to support these products without requiring new legislation.
Ondo Finance Advocates for Onshore Perpetual Futures
Ondo Finance has officially petitioned the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) to facilitate the transition of perpetual futures tied to individual US stocks into the domestic regulatory environment. By submitting three comment letters on August 24, the firm aims to bridge the gap between burgeoning decentralized finance (DeFi) innovation and traditional market oversight. Ondo contends that the current regulatory structure is already robust enough to accommodate these derivative products, suggesting that the industry does not need to wait for new, specialized legislation to modernize its offerings.
Leveraging Existing Frameworks
The core of Ondo’s argument rests on the assertion that existing security futures frameworks can be adapted to support perpetual futures. By proposing this interpretation, Ondo seeks to provide a legal pathway for financial innovation within the United States, rather than pushing these activities to offshore jurisdictions. The firm emphasizes that modern margining practices and the integration of onchain market data are compatible with current oversight mechanisms, potentially allowing for a seamless integration of digital asset technology into standard stock market operations.
The Global Context of Perpetual Futures
Currently, perpetual futures—a type of derivative that does not have an expiration date—are widely popular in the cryptocurrency sector, often operating through offshore entities. Ondo Finance itself currently provides stablecoin-settled perpetual futures on individual US-listed stocks through its Panama-based affiliate. This operational reality highlights a significant "regulatory arbitrage," where US investors may seek exposure to these innovative instruments via international platforms because domestic options are limited or nonexistent.
Implications for Market Data and Transparency
One of the most compelling aspects of Ondo’s proposal is the inclusion of onchain market data as a viable component of the regulatory reporting process. By suggesting that blockchain-based data can satisfy transparency requirements, Ondo is testing the boundaries of how regulators perceive digital ledger technology. If accepted, this approach could set a precedent for how other firms integrate blockchain analytics into traditional financial reporting, potentially increasing the efficiency and speed of market monitoring for the SEC and CFTC.
Future Trends in Financial Regulation
Should the SEC and CFTC adopt the framework proposed by Ondo, it could signal a shift toward a more permissive environment for digital asset-linked derivatives. This would likely encourage other fintech firms to bring their operations onshore, fostering a more competitive landscape for US-based financial products. However, the path forward depends on whether regulators believe that existing frameworks truly possess the flexibility to handle the unique risks associated with perpetual, onchain derivatives without compromising investor protection.
Conclusion
The proposal by Ondo Finance represents a significant challenge to the status quo in US financial markets. By arguing that the current rules are sufficient, the firm is attempting to accelerate the integration of DeFi concepts into the mainstream. Whether this initiative succeeds will depend on the willingness of US regulators to interpret their existing mandates in a way that accommodates the technological advancements of the digital asset era.