Theodore Gillibrand, son of U.S. Senator Kirsten Gillibrand, has secured $30 million in funding for a new derivatives trading platform focused on perpetual futures, or “perps.” The startup, American Perpetuals Exchange Corporation (APEC), aims to operate under the joint oversight of the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). This initiative underscores the evolving regulatory landscape for digital assets and complex financial instruments in the United States.
Key Takeaways
- American Perpetuals Exchange Corporation (APEC) has raised $30 million at a $300 million valuation.
- The startup seeks a Designated Contract Market (DCM) license with an exemption to list single-name equity perpetuals under joint CFTC and SEC oversight.
- This move highlights the ongoing efforts to harmonize regulatory approaches to novel financial products between the CFTC and SEC.
- Recent regulatory approvals for similar products by the CFTC have led to legal challenges, indicating the complexity of the current framework.
- APEC also intends to apply for a Derivatives Clearing Organization (DCO) license to clear transactions internally, requiring significant capital for compliance and operations.
The funding round, reported by Fortune, was reportedly led by venture firm Lux Capital. APEC’s stated goal is to obtain a Designated Contract Market license, coupled with a special exemption, to offer perpetual futures on single-name equities. This ambition necessitates navigating the complex and often overlapping jurisdictions of the CFTC and the SEC, agencies currently engaged in a broader effort to “harmonize” their strategies for overseeing emerging markets and asset classes, including cryptocurrencies and derivatives.
The push for regulated perps trading in the U.S. has gained momentum. The CFTC has recently approved Kalshi to list the first official bitcoin perpetual futures and allowed Coinbase to list long-dated futures with perps-like characteristics. Kraken has also announced plans to launch crypto perps on its Kraken Pro platform. However, this regulatory progression is not without contention. CME Group has filed a lawsuit against the CFTC, arguing that these perps should be classified as swaps under the Dodd-Frank Act, which imposes stricter regulations than those applied to futures. CME’s position is that these approvals effectively allow market participants to circumvent crucial swap rules designed to mitigate systemic risk.
A memo detailing a meeting on June 4th, attended by Theodore Gillibrand, SEC and CFTC officials, and representatives from legal and lobbying firms, indicated APEC’s strategic focus on regulatory harmonization. The memo highlights the demand for equity perpetual futures and the risk of this demand being redirected to offshore platforms lacking U.S. oversight, where participants lack recourse and regulators have limited visibility. APEC’s objective is to provide a regulated domestic venue for such instruments.
Furthermore, APEC plans to apply for a Derivatives Clearing Organization (DCO) license, which would enable the company to clear its own transactions. The application process requires substantial capital investment, allocated towards regulatory capital, compliance infrastructure, legal expenditures, and the development of robust technical systems and legal frameworks. The memo suggests that successfully navigating this licensing process could provide a significant market advantage, positioning APEC as a pioneer in the regulated U.S. perpetuals exchange market.
Theodore Gillibrand’s background includes prior experience with venture capital firm Paradigm, a notable backer of Kalshi, and an internship at Andreessen Horowitz. Senator Kirsten Gillibrand has been an advocate for the digital asset industry, collaborating with Senator Cynthia Lummis on legislative efforts such as the Responsible Financial Innovation Act and the GENIUS Act, which addresses stablecoins.
Potential Regulatory Precedent
The American Perpetuals Exchange Corporation’s pursuit of dual CFTC and SEC oversight for single-name equity perpetuals represents a significant test case for U.S. financial regulators. If APEC successfully obtains the necessary licenses and exemptions, it could establish a new precedent for how complex derivatives linked to equities and potentially other asset classes are regulated domestically. This venture could either signal a pathway for other platforms seeking to offer similar products under a harmonized framework or, conversely, lead to increased scrutiny and a more rigid regulatory definition of permissible products, particularly in light of ongoing legal challenges such as the CME Group’s lawsuit. The outcome will have substantial implications for market structure, investor protection, and the overall growth of regulated digital and traditional derivatives markets in the United States.
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