The Perpetual Question: Who Sets the Price of American Equities?

The Blockchain Association's recent call for the SEC and CFTC to coordinate on equity perpetuals isn't a request for clarity. It's an admission of a structural failure. The U.S. regulatory apparatus is fragmenting the market for its own assets, and the industry is asking two agencies to stop fighting over a definitional turf war long enough to define a product that is neither fully a security nor fully a commodity. That's the code-level problem: the product doesn't fit the registry, and the registry is refusing to compile. The immediate context is straightforward. Equity perpetuals are a derivative fusion—traditional swap mechanics combined with crypto-native funding rates. They let traders take leveraged positions on stocks without an expiry date. The problem is jurisdiction: the SEC claims securities, the CFTC claims commodities. The Blockchain Association's argument is pragmatic—reduce offshore trading, bring volume back to U.S. markets, and increase market competitiveness. On paper, that sounds like a call for regulatory convergence. But the mechanism underneath is a request for a joint custody agreement on a financial instrument that both agencies have a mandate to claim but neither has a mandate to define. The separation of powers between them is not a bug in the system; it's a feature that predates crypto. And it's the exact reason why this coordination request will likely fail. Let me break down the institutional math. The SEC operates on investor protection through disclosure. The CFTC operates on market integrity through position limits and clearing. These are not minor philosophical differences. They are core procedural frameworks with different enforcement arms, different filing requirements, and different definitions of a 'registered security' versus a 'contract for future delivery.' Getting them to agree on a joint rulebook for equity perps is not a matter of signing a memo. It's a matter of rewriting the statutory definitions that give them their institutional power in the first place. That's why the Blockchain Association's request is both the most sensible and most naive thing an industry group can do. Sensible because the ambiguity is clearly hurting U.S. market participation. Naive because the conflict is not an oversight; it's the very structure of U.S. financial regulation since 1934. My own forensic reading of this situation suggests the association's deeper concern isn't just 'clarity.' It's the fact that the dollar-denominated pricing of American equities is migrating to jurisdictions with more defined, if more permissive, rules. Singapore, Hong Kong, and London are not waiting for the SEC to get its act together. They are building regulatory frameworks for perpetual contracts that clear settlement of equity assets with less friction. This is the quiet crisis: the marginal price setter for U.S. equities is moving offshore, not because offshore markets have better valuations, but because they have a rulebook. The Blockchain Association's statement about 'reducing offshore trading' is really about bringing that price discovery process back into a U.S. regulatory perimeter. If you're a derivative trader in Singapore, you can enter into a contract on Tesla stock that settles in USDC. The pricing is derived from the stock but the contract is not under U.S. securities law. That is a massive, unregulated-ish gap in the U.S. financial architecture. The contrarian angle is often missed. The industry is calling for 'coordination' as if the problem is a communication issue between two agencies. It's not. It's a jurisdictional contest over which agency gets the fee budget and the enforcement power. The SEC and CFTC have a long history of 'memoranda of understanding' that have done little to resolve fundamental overlaps. The real fix is legislative: Congress needs to define, in statute, what an equity perpetual is. Without that, any joint statement from the SEC and CFTC is just a treaty between two states with no enforceability. The Blockchain Association, in urging the agencies, may be hoping for a political shortcut, but the rule of law is not a to-do list. The political process is the only mechanism that can resolve this. Let's talk about the security angle. There's a deep risk in the coordination effort that gets overlooked: the regulatory capture of the perpetuals market. If the SEC and CFTC do reach a coordinated framework, the most likely outcome is a set of rules that favor large, established players—the ones who can afford compliance departments that cost as much as a small country. That means Coinbase, Robinhood, and Interactive Brokers will have a clear advantage. The smaller derivatives exchanges, the ones that might actually offer competitive pricing, will be priced out of the market by compliance overhead. The result will be a U.S. market that is 'clean' but not competitive. The offshore market will remain for the innovative players, and the flow will continue—just not in the form of a registered derivative. It will become a swap traded through a swap execution facility in a more permissive jurisdiction, still denominated in USD, still referencing U.S. equities, but entirely outside the reach of the rulemaking the association is asking for. The 'reducing offshore trading' goal will actually fail because the U.S. regulatory clarity will come with a tax rate: the cost of compliance. There's also a hidden assumption in the Blockchain Association's call. They assume that offshore trading is a bad thing. That's not an obvious fact. The offshore liquidity pool is not just a shadow market; it's a real source of price discovery for U.S. equities after hours and on weekends. The offshore market doesn't distort the U.S. market; it's a extension of it. Bringing it onshore doesn't necessarily improve market integrity; it just concentrates the flow in a single timezone with single clearing house, which is a higher systemic risk, not a lower one. The SEC and CFTC might be better off watching the offshore volume as a leading indicator for the onshore volatility. But that's a data-forensics angle, and no regulator thinks that way. If I was to put a stake in the ground: the coordination framework will be proposed within the next 18 months, but it won't be an actual joint rulemaking. It will be a series of separate proposals with a joint notice, and the effective date will be pushed out by two to three years. The industry will get its 'clarity'—in the form of a compliance regime that no one can actually meet in the short term—and the offshore flow will continue to grow. The real signal to watch isn't the SEC and CFTC. It's the Singapore Monetary Authority and the Hong Kong SFC. If they move first, the U.S. framework becomes a follower. The pricing of American assets will be set where the rules are clear. And right now, that place is not Washington DC. Zero knowledge isn't a solution for this problem; it's a transparency requirement. The market needs to know which rulebook is governing its settlement. The blockchain association is asking for a rulebook, but they don't know what it will look like. And that's the real risk: not that the rulebook is strict, but that it's so ambiguous that the only response is to take the risk offshore. The code is the contract. The regulatory code is the final contract. And right now, it's uncompiled.