CME's Duffy Calls Perpetuals Disguised Swaps Built Purely for Leverage

Bloomberg

Offshore perpetual futures legally qualify as swaps under Dodd-Frank and exist solely to import extreme leverage while evading US margin requirements and tax laws, CME Chief Executive Officer Terry Duffy says.

AI-assisted summary of CME's Terry Duffy on the Disconcerting State of Finance Regulation — original source. Check the original for full context.

Source published: 2026-10-20

Key ideas

Terry Duffy is transitioning from CEO of CME Group to Executive Chairman of the Board, supporting Lynne Fitzpatrick as she takes over leadership. (0:00)
Duffy strongly critiques prediction markets and novel retail contracts, arguing that contracts lacking natural commercial hedgers violate CFTC Core Principle 3 against price manipulation. (5:00)
Under Dodd-Frank statutory definitions, Duffy contends that perpetual futures are legally swaps due to periodic funding rate cash flows, making them subject to swap dealer rules and ordinary income tax rather than Section 1256 treatment. (15:00)
CME is partnering with Don Wilson to develop compute and GPU futures, though Duffy reports the federal administration has delayed the rollout on unspecified national security grounds. (25:34)
While 24/7 trading is viewed as inevitable, Duffy identifies the legacy banking system as the primary roadblock, because market participants cannot pre-fund margin across the $76 trillion US equity market when commercial banks close over the weekend. (27:32)

Detailed notes

## Background Published by Bloomberg on October 20, 2026, on their podcast RSS feed, this live episode of Odd Lots features an exit interview with longtime CME Group CEO and Chairman Terry Duffy recorded at City Winery in Chicago. The show notes highlight Duffy's nearly five-decade career spanning the inception of the CFTC to the rise of prediction markets, perpetual futures, and 24/7 trading, as he prepares to transition to Executive Chairman.

## TL;DR In a wide-ranging conversation, Terry Duffy evaluates the modern state of financial regulation, sharply criticizing prediction markets and retail event contracts for lacking commercial purpose and violating CFTC Core Principle 3 against manipulation. He argues that perpetual futures legally constitute swaps under Dodd-Frank and warns that offshore decentralized platforms like Hyperliquid improperly evade institutional compliance and KYC obligations. Duffy also discusses the CME's efforts to launch compute and GPU futures, the banking bottlenecks preventing full 24/7 financial market operations, and his personal career milestones, including a formative $150,000 loss in 1981 and the unprecedented stress of oil prices plunging to -$37.63 during the 2020 pandemic.

## Atmosphere & style The episode carries an energetic, engaging live-theater atmosphere, blending casual stage banter between Odd Lots hosts Tracy Alloway and Joe Weisenthal with Duffy's candid, no-nonsense Midwestern executive delivery. Duffy projects the battle-tested confidence of a five-decade market veteran, alternating between lighthearted quips about competitors and firm, uncompromising defenses of legacy market rules. The conversation feels like an insider masterclass, marked by gripping war stories—from blowing up a trading account in 1981 to managing negative oil prices in 2020—grounded in rigorous risk discipline and a deep respect for durable financial architecture.

## Bulletin - `00:00` Terry Duffy is transitioning from CEO of CME Group to Executive Chairman of the Board, supporting Lynne Fitzpatrick as she takes over leadership. - `05:00` Duffy strongly critiques prediction markets and novel retail contracts, arguing that contracts lacking natural commercial hedgers violate CFTC Core Principle 3 against price manipulation. - `15:00` Under Dodd-Frank statutory definitions, Duffy contends that perpetual futures are legally swaps due to periodic funding rate cash flows, making them subject to swap dealer rules and ordinary income tax rather than Section 1256 treatment. - `25:34` CME is partnering with Don Wilson to develop compute and GPU futures, though Duffy reports the federal administration has delayed the rollout on unspecified national security grounds. - `27:32` While 24/7 trading is viewed as inevitable, Duffy identifies the legacy banking system as the primary roadblock, because market participants cannot pre-fund margin across the $76 trillion US equity market when commercial banks close over the weekend.

## Key takeaways - `05:00` Duffy views durable market structure as rooted in codified acts of Congress rather than temporary agency-level workarounds or executive policies that subsequent administrations can reverse. - `05:00` Prediction markets that wager on individual political decisions or novelty stunts present clear manipulation risks and lack an underlying economic or commercial hedging purpose. - `06:58` Duffy rejects the premise that allowing insider trading in prediction markets creates beneficial price discovery, stating it violates the foundational exchange mission of democratizing information access. - `10:00` Unlike individual player proposition bets, CME's collaboration with Future Sports structures sports exposure into team-based index contracts designed for franchises and corporate sponsors to hedge enterprise risk. - `15:00` Perpetual futures fail to qualify as legitimate futures under federal law because periodic funding rate payments match the statutory definition of swaps created in Dodd-Frank. - `15:00` Institutional risk managers holding loans against sovereign debt require date-certain contract expirations rather than discretionary funding rates, making perpetuals unsuited for institutional hedging. - `20:00` Decentralized platforms cannot disclaim institutional responsibility under CEA Core Principle 9, and operating without KYC while permitting high leverage exposes markets to cascading margin liquidations. - `20:00` Duffy argues that demand for perpetual futures is driven purely by a desire for extreme leverage rather than calendar convenience, noting retail investors actively trade in and out of positions anyway. - `25:34` The market for processing power and GPUs is projected to surpass crypto multiples by 2030, making compute futures a critical commercial risk-management instrument despite current regulatory delays. - `27:32` Pre-funding institutional markets like the $76 trillion US equity ecosystem over weekends is unfeasible until the commercial banking plumbing achieves true continuous operation. - `30:00` Trading venues are moving toward 23.5-hour trading windows, but clearing, risk management, and operational capacity must expand to absorb continuous volatility shocks. - `30:47` Duffy cites losing $150,000 of borrowed money in 1981 as his primary career lesson in risk management, teaching him that having an exit strategy before entering any position is essential to survival. - `32:20` The April 2020 collapse of WTI crude futures to -$37.63 per barrel was the most unnerving event of Duffy's career, necessitating an emergency update to CME's option models to support negative strike prices when physical storage became saturated.

## Detailed walkthrough ### `00:00` Introduction: Live from Chicago with Terry Duffy

Odd Lots hosts Tracy Allaway and Joe Weisenthal welcome the audience to a special live-taped episode recorded at City Winery in Chicago. Emphasizing Chicago's standing as a premier global trading capital, they introduce their guest, Terry Duffy, the long-serving CEO and Chairman of CME Group. Tracy notes that Duffy is preparing for a transition in his leadership role next year, stepping into the position of Executive Chairman of the Board. Duffy embraces this change as an orderly succession, highlighting that after 46 years with the CME—starting from his very first role making just $56 a week, through leading the exchange's initial public offering as chairman in 2002, to his long tenure as CEO—ensuring stability is critical. He explains that he plans to remain as Executive Chairman to support incoming leadership, specifically helping Lynne Fitzpatrick take the helm smoothly.

When Tracy jokes that this conversation serves as an official exit interview where Duffy should disclose all his legendary industry war stories, Duffy playfully demurs, observing that because he remains the active CEO of a major publicly traded company, he must exercise careful corporate discretion.

`03:48` Five Decades of Market Evolution and the CFTC

Reflecting on his start around 1980, Duffy traces how market structure and oversight have evolved across nearly five decades under the Commodity Futures Trading Commission (CFTC). Duffy notes that when he and fellow trading veteran Don Wilson entered the business in their early twenties (though Duffy jokes that he is a decade older than Wilson), the CFTC was virtually brand-new, having been formed around 1972–1973 as a principles-based regulatory agency originally tailored for agricultural commodities. Over the ensuing decades, the purview transformed dramatically to encompass financial futures, stock index futures, and now cryptocurrency and offshore digital instruments. He recounts how external market shocks, such as the leverage buildup that triggered the 2008 global financial crisis, spurred sweeping legislative overhauls like Dodd-Frank, parts of which the industry is still wrestling with 16 years later.

```mermaid flowchart TD accTitle: Evolution of CFTC Regulatory Scope accDescr: Diagram tracing the expansion of CFTC oversight from 1970s agricultural contracts to modern digital assets.

subgraph Phase1["1970s: Foundational Oversight"] A["CFTC Established (ca. 1972-1973)"] --> B["Principles-Based Ag Regulation"] end

subgraph Phase2["1980s-2000s: Financial Expansion"] B --> C["Financial Futures & Equity Indices"] C --> D["2008 Financial Crisis & Dodd-Frank"] end

subgraph Phase3["Modern Era: Novel Instruments"] D --> E["Crypto & Digital Contracts"] E --> F["Controversial Prediction Markets"] end ```

`05:00` Prediction Markets, Core Principles, and the "Ready, Fire, Aim" Approach

Joe poses a pointed question about whether foundational financial laws still carry weight, asking how an agency that originated to oversee grain futures is now nominally supervising products that mirror sports betting and offshore novelties. Duffy responds bluntly that the current environment feels like a concerning "ready, fire, aim" strategy. He shares that out of numerous contracts submitted to the CFTC, he is troubled that not a single one appears to have been denied. He takes direct aim at prediction markets, singling out contracts such as betting on how many hot dogs Joey Chestnut eats at the Nathan's Famous contest, or wagering on whether disgraced former New York Congressman George Santos would attend the State of the Union address. Duffy points out that Santos bet against himself and simply did not show up, creating an obvious manipulation risk. Duffy asks what economic purpose such contracts serve and insists they directly violate CFTC Core Principle 3, which mandates that contracts must not be readily susceptible to price manipulation.

Duffy stresses that legitimate markets require balanced, durable rules rather than the circumvention of congressional authority via administrative shortcuts that can vanish overnight. Pointing out the instability of agency-level workarounds, Duffy states:

> “The way we grow good, strong, confident markets is to have a good balance of regulation, not to have no regulation. No regulation is on borrowed time. There's no question about it. Always has been, always will be.”

- Duffy points out that administrative rules at agencies like the SEC or CFTC lack permanency: just as one administration issues executive orders overturning prior policies, a subsequent administration can wipe them away with a single stroke of a pen. - True durability in market structure requires codified acts of Congress and smart, sustainable frameworks rather than unvetted regulatory concessions.

`06:58` The Illusion of Informational Value in Insider Trading

Addressing the argument from prediction market advocates that allowing participants with inside information to trade generates valuable price discovery for the public, Duffy rejects the idea entirely. Calling the premise offensive to his 25 years of running and trading in regulated exchanges, he argues that the entire historical mission of market technology and fairness has been to democratize information so that everyone receives it simultaneously. While individual participants may have vastly different capital resources, fairness depends on equal access to the underlying facts.

> “So to say that insider information could be a good thing on anything is offendable to me as a guy who's traded markets and run markets for the last 25 years. I just don't see any place in credibility if you're going to grow anything by saying you get to know, you get to know, but I don't get to know.”

He draws a parallel to services offering paid early access, noting that charging exorbitant sums to provide faster feeds undermines market credibility. When Tracy and Joe playfully joke that attendees in the live Chicago theater audience are receiving Duffy's thoughts before podcast listeners hear the recording, Duffy laughs off the comparison, pointing out that he is only offering personal opinions rather than market-moving data, and that markets are not currently open for trading.

`10:00` Prediction Markets, Core Principles, and Sports Indexing

The discussion begins with a challenge to Terry Duffy: critics from the prediction market space argue that the CME is simply protecting an entrenched legacy business, cloaking commercial self-interest in the language of durable regulation. Duffy rejects this framing, clarifying that he is not opposed to all novel products, but rather to contracts that blatantly violate Core Principle 3 of the Commodity Exchange Act (CEA)—which mandates that listed contracts must not be readily susceptible to manipulation. Duffy points out that legitimate futures contracts require an underlying commercial purpose:

> “And most contracts need to have a natural buyer, a natural seller, a commercial, and a producer of that product in order to facilitate a contract.”

Without those economic participants hedging real-world exposure, contracts risk becoming pure gambling vehicles. Duffy singles out individual player proposition bets as an obvious example: whether LeBron James grabs two or three rebounds has no broader economic footprint or systemic impact on the audience or the economy, serving only whoever happens to hold the yes or no side of the wager.

To contrast pure betting with legitimate financial hedging, Duffy highlights CME's collaboration with an Australian firm called Future Sports. Unlike individual player props, Future Sports structures sports exposure as an index, functioning much like an S&P 500 for sports teams where each team starts with a baseline value of 7,500 points and fluctuates based on actual performance. This design allows sports franchise owners to monetize team value and hedge enterprise risks without selling equity. Duffy jokes about the CME’s sponsorship of the Chicago White Sox during an unexpectedly rough season, noting that his friend Jerry Reinsdorf might have charged far more for the sleeve patch sponsorship if a liquid market had existed to lay off that performance-related exposure. CME has expanded this institutional model to partnerships with the NBA and Major League Baseball (MLB), establishing an economic hedging system that serves franchise and corporate ecosystems rather than retail gambling.

```mermaid flowchart TD accTitle: CFTC Contract Qualification vs Retail Prediction Markets accDescr: Contrasting genuine commercial hedging products with manipulative or purely speculative gambling contracts under CEA rules.

subgraph CEA["CEA Core Principle 3 Test"] A["Contract Proposal"] --> B{"Has Natural Buyers, Sellers, Producers & Commercials?"} B -->|Yes| C["Eligible Exchange Product (e.g., Future Sports Team Index)"] B -->|No / Easily Manipulated| D["Susceptible to Manipulation (Rejected / Deemed Gambling)"] end

subgraph Sports["Sports Product Divergence"] C --> E["Institutional Risk Management (Teams hedge value, sponsors lay off risk)"] D --> F["Player Prop Wagers (e.g., LeBron James rebound count; zero macro impact)"] end ```

- Under CEA Core Principle 3, exchanges are legally barred from listing contracts that are susceptible to market manipulation. - Future Sports establishes a baseline index valuation of 7,500 points per team, moving up or down based on performance. - CME has executed agreements with both Major League Baseball (MLB) and the National Basketball Association (NBA) to explore index-based risk vehicles.

---

`15:00` Why Perpetual Futures Are Legally Swaps, Not Futures

Turning to perpetual futures ("perps"), Duffy addresses upcoming guest Don Wilson (founder of DRW), jokingly warning that Wilson is "wrong" on the topic. When asked about reports that CME shelved plans for a 24/7 oil contract due to pushback, Duffy clarifies that CME never attempted to list an oil *perpetual* contract; rather, they designed a micro 10-barrel 24/7 oil futures contract to compete with offshore platforms that illegally allow US retail traders access via VPNs without regulatory oversight.

Duffy launches into a detailed regulatory and legal critique of perpetual contracts, drawing on his experience testifying over thirty times before Congress during the drafting of the Dodd-Frank Act in 2010. He explains that perps rely on a mechanism known as the funding rate, where longs pay shorts or shorts pay longs depending on whether the trading price sits above or below the spot price. Under federal statutory definitions established after the 2008 financial crisis, whenever two counterparties periodically exchange cash flows to maintain price parity, that instrument is legally defined as a swap, not a futures contract:

> “In the definition of a swap, anytime two parties pay each other, it's deemed a swap.”

By disguising swaps as futures, Duffy argues, offshore crypto platforms circumvented Congress to bypass strict swap dealer registration, 5-day to 10-day margin clearing rules, and ordinary income tax rates, attempting instead to capture Section 1256 tax treatment (a favorable 60% long-term / 40% short-term capital gains blend). Furthermore, Duffy argues that perps are fundamentally unfit for institutional risk management because institutions managing loans against a $40 trillion sovereign debt pile require a "date certain" expiration to settle balances, rather than dealing with discretionary hourly or daily funding rates.

---

`18:00` Offshore Platforms, Hyperliquid, and Regulatory Evasion

The conversation pivots to offshore decentralized platforms, specifically addressing Hyperliquid and remarks from political figures, including Donald Trump, about enticing such platforms to the United States. When asked if he has a perspective on presidential enthusiasm for offshore perp venues, Duffy jokes sceptically about whether political figures truly understand the technical mechanics of Hyperliquid.

Addressing an interview with Hyperliquid founder Jeff Yan, Duffy pushes back aggressively against Yan's claim that decentralized protocols do not need direct exchange regulation because compliance should fall on the individual users or "deployers." Duffy highlights that the vast majority of activity (an estimated 98% of users trading generic pairs) relies on an offshore engine specifically engineered to sidestep domestic regulatory protections. Duffy insists that letting platforms wash their hands of structural market safeguards simply leaves investors exposed to the very regulatory degradations the Commodity Exchange Act was written to prevent.

`20:00` Hyperliquid, Core Principle 9, and the Real Motive for Perpetuals

Terry Duffy addresses the architecture of platforms like Hyperliquid, noting that while Jeff argues Hyperliquid merely serves as the underlying plumbing for crypto—leaving other products to be listed by entities like Trade XYZ—the regulatory and systemic risks remain severe. While Duffy acknowledges that he likes Jeff personally and considers him "a brilliant, brilliant guy," he argues that operating without Know Your Customer (KYC) compliance is untenable under federal rules. Furthermore, on-chain auto-liquidations combined with extreme leverage—ranging from 10% to 15% up to as much as 250%—mean that a move of just a tick or two can trigger cascading margin liquidations that disrupt markets. Duffy stresses that institutional venues cannot simply disclaim responsibility for their order books, citing statutory requirements under the Commodity Exchange Act:

> “Because what he's saying does not comply with U.S. law. It's actually in violation of core principle nine. And I can go through all the nuances of core principle nine, but it's basically fair and ready market access to all. But you have an obligation to make certain that you're policing these markets as an institution, not just as a user.”

When the hosts push back with a devil's advocate question regarding leverage limits—pointing out that Kalshi caps leverage at roughly six times and that the Commodity Futures Trading Commission (CFTC) has considered limits to gradually introduce perpetuals—Duffy dismisses the notion that perpetual contracts are genuinely desired for their structural convenience. He argues that participants do not clamor for perpetuals because they fear expiration calendars or understand the funding rate mechanism, which is tethered strictly to the spot price rather than the forward curve. Rather, the push is purely an attempt to smuggle high leverage into new asset classes, from sports betting prediction markets to single-stock perpetuals:

> “Perpetuals, as they know, are not being introduced to the United States because there's no expiration date or because people understand the funding rate. They're trying to be brought here for leverage and leverage only. And if that's not the case, can you tell me why firms are trying to get leverage on prediction markets on sports now? That's the next thing they want to do.”

- **Retail Trading Patterns**: Duffy points out that ordinary retail investors (including himself) do not hold futures positions for three to six months; they trade actively in and out, rendering the "roll date convenience" argument behind perpetuals hollow. - **Kalshi Bitcoin Leverage**: Duffy observes that Kalshi has maintained its Bitcoin leverage at levels essentially identical to CME's Bitcoin futures margin requirements.

`25:34` GPU Futures and Regulatory Headwinds

Turning to product innovation, the conversation shifts to whether exchange leaders develop an instinct for which contracts will succeed versus those that become illiquid ghost towns, such as Case-Shiller housing futures, cheese, or uranium. Duffy explains that market cycles often resurrect abandoned contracts—pointing to interest rate products that once seemed obsolete but roared back to life during COVID-19 as overnight lending rates spiked. He then discusses CME's partnership with Don Wilson to develop compute and GPU futures. Despite skeptics questioning whether processing power constitutes a legitimate asset class, Duffy emphasizes that compute is already a trillion-dollar industry that will eclipse digital assets:

> “The GPU market will be multiples of the size of crypto by 2030. For sure. And for that industry and for the administration to be holding this back right now, they're saying it's for national security issues, which I have no idea what they're referring to.”

Duffy expresses frustration that the federal administration is holding up the launch of GPU futures on vague national security grounds, pointing out the contradiction when the U.S. aims to lead the world in artificial intelligence, domestic data centers, and advanced hardware manufacturing. The hosts also note the selective regulatory tolerance across the sector: while exotic event contracts face scrutiny, Kalshi has been allowed to keep its prediction market on compute running without being forced to take it down.

`27:32` The 24/7 Trading Reality and the Banking Bottleneck

On the inevitability of round-the-clock trading, Duffy pushes back against those in the financial establishment who complain about working late nights or weekends. Because market exposure never halts, market structures must eventually adapt to continuous trading:

> “I believe, to be honest with you, and I've been saying this for quite some time, 24-7 is inevitable. And you can fight it. You can say, I don't like it. I don't want to stay up at a desk. I don't want to stay up at 2 in the morning. But risk doesn't know what time of day it is.”

However, Duffy argues that the true bottleneck preventing 24/7 trading from launching across equities and interest rates is not exchange technology or trader exhaustion—it is the legacy commercial banking system. While a relatively small market like crypto can be pre-funded and traded around the clock, pre-funding deep institutional asset classes over a weekend when banks are closed is impossible:

```mermaid flowchart TD accTitle: Structural Obstacle to 24-7 Financial Markets accDescr: Diagram contrasting pre-fundable small markets like crypto with the $76 trillion US equity market blocked by weekend banking closures. subgraph SmallScale["Viable Under Current Plumbing"] A["Crypto Markets"] --> B["Manageable Total Value"] B --> C["Pre-funded on Weekends"] C --> D["24/7 Trading Operational"] end

subgraph InstitutionalScale["Blocked by Banking System"] E["U.S. Equity Markets ($76T) & Rates"] --> F["Massive Weekend Exposure"] F --> G["Commercial Banks Closed"] G --> H["Cannot Pre-Fund Margin"] H --> I["24/7 Trading Blocked"] end ```

Duffy notes that the U.S. equity market alone represents a $76 trillion ecosystem, and no market participant has the balance sheet capacity to pre-fund that volume on a Friday afternoon to cover weekend volatility while banks are offline. Although the Federal Reserve is deploying real-time payments infrastructure, Duffy—who met for an hour and a half with SEC Chair Paul Atkins to discuss these settlement and trading bottlenecks—maintains that the current financial plumbing is still far from ready to support continuous trading for core institutional asset classes.

`30:00` The Evolution Toward 24-Hour Trading and Infrastructure Constraints

Terry Duffy observes that market continuousness is an inevitable trajectory, explaining that as long as banking fails to run seamlessly around the clock, markets will step forward to establish round-the-clock trading anyway. He acknowledges the risks, noting that while participants will have to navigate sporadic pockets of illiquidity, intraday illiquidity is already an everyday reality that professional financial markets know how to handle. Equity markets are already shifting rapidly in this direction, with cash equity platforms moving toward 23.5-hour trading windows by the end of the year, spearheaded by preparations at venues like Nasdaq.

Despite the commercial push into near-continuous execution, Duffy emphasizes that operational capacity and clearing rails must catch up to commercial ambition. Operating around the clock is not simply a matter of opening matching engines, but of ensuring that clearing, risk management, and settlement plumbing can absorb shocks at any hour. As Duffy plainly states: “Markets are going 24-7, but the infrastructure has to support it.”

- Cash equities are slated to begin 23.5-hour trading schedules before the end of the year, marking the first time cash equity markets trade across such an extended schedule. - Nasdaq is actively positioning its systems to support extended 23.5-hour execution. - Structural illiquidity during off-peak hours mirrors existing intraday liquidity pockets rather than representing a completely unprecedented market phenomenon.

---

`30:47` Career Advice: Going Broke in 1981 and Respecting the Exit Sign

Reflecting on what advice he would pass back to his younger self at the start of his five-decade career, Duffy points to a devastating early trading failure as his greatest masterclass in discipline. Back in 1981, when he was just starting out as a young trader without a dollar to his name, he lost $150,000 of entirely borrowed capital. Navigating that catastrophic loss instilled a permanent sense of caution and risk discipline that later guided his executive stewardship at CME Group. He notes that whenever he speaks to young students, such as during a recent talk at Georgetown University, he directs their attention directly to the room's illuminated exit sign to illustrate life and trading.

```mermaid flowchart LR accTitle: Trade and Life Decision Flow accDescr: A three-step decision process moving from establishing an exit strategy to trade entry and finally acknowledging when one is wrong. A["Formulate Clear Exit Strategy"] --> B["Enter Position or Commitment"] B --> C["Acknowledge Loss / Accept Being Wrong"] ```

Duffy stresses that market entry is trivially easy for anyone with capital, but executing an exit requires emotional control and humility. He reminds young professionals that ego frequently prevents people from recognizing failure, yet accepting that a thesis has failed is the prerequisite for long-term survival. As Duffy summarizes: “If you can have an exit strategy, you will be more successful as you enter into anything.”

- In 1981, Duffy blew up his trading account, losing $150,000 in borrowed money while possessing no personal net worth. - He emphasizes maintaining a strict moral compass, cultivating patience, and actively resisting the natural human aversion to admitting an error. - Planning an exit route prior to entry is the primary determinant of whether a market participant survives over the long run.

---

`32:20` War Stories: Why Negative Oil in 2020 Surpassed the 2008 Financial Crisis

Asked to identify the single most frightening moment of his career spanning multiple decades and historic panics, Duffy contrasts the Great Financial Crisis of 2008 with the unprecedented volatility of the COVID-19 pandemic in 2020. Having stepped into the role of CME chairman back in 2002, the unfolding collapse of 2008 was disorienting, yet Duffy never doubted that the federal government would eventually intervene to backstop the core financial system; the only unknown was how many institutions would fail before that safety net arrived. In contrast, the market dislocation of April 2020 was visceral, chaotic, and devoid of clear historical precedent, creating panic that was far more unnerving.

The peak of that fear came on April 20, 2020, when the May WTI crude oil futures contract collapsed past zero into deeply negative territory, settling at -$37.63 a barrel. Duffy recalls standing on a rooftop giving live television interviews while being heavily criticized for permitting the price of oil to drop below zero. He defends CME’s handling of the event, explaining that the exchange had proactively altered its option pricing models to support negative strikes after recognizing that physical storage at delivery points and New York harbor had reached total capacity. Physical demand evaporated instantaneously, leaving nowhere to store crude oil and forcing the futures price to reflect the true physical cost of handling unwanted barrels. Duffy reflects on that episode as the pinnacle of career stress: “I think that the pandemic happened would be one of the things that scared me the most because I think when you yell fire in a crowded theater, that's what it felt like to me.”

- Duffy became CME chairman in 2002, placing him at the helm through both the 2008 banking crisis and the 2020 pandemic volatility. - On April 20, 2020, WTI crude futures plummeted below zero to settle at -$37.63 per barrel as global physical demand vanished and commercial storage reached saturation. - CME adjusted its clearing systems and options pricing architecture ahead of the contract expiration to accommodate negative strike prices, allowing true market price discovery to function even as market participants faced unprecedented conditions.

---

`34:25` Odd Lots Wrap-Up and Episode Outro

Closing the live session recorded at City Winery in Chicago, co-hosts Tracy Alloway and Joe Weisenthal thank Terry Duffy for sharing his perspectives as he prepares to transition out of the chief executive role at CME Group. They deliver their closing credits, giving social handles for themselves and the show's production team—including Carmen Rodriguez, Dashiell Bennett, Kale Brooks, and Kevin Lozano—and urge listeners and video viewers to leave reviews and subscribe. The segment concludes with network sponsor messaging regarding shingles prevention and awareness from GSK, followed by a promotional spot for the *Bloomberg Money* podcast hosted by Scarlett Fu and Tom Keene.

## Notable quotes > `05:00` The way we grow good, strong, confident markets is to have a good balance of regulation, not to have no regulation. No regulation is on borrowed time. — Terry Duffy

> `30:00` Markets are going 24-7, but the infrastructure has to support it. — Terry Duffy

> `30:47` If you can have an exit strategy, you will be more successful as you enter into anything. — Terry Duffy

> `25:34` The GPU market will be multiples of the size of crypto by 2030. For sure. — Terry Duffy

> `10:00` most contracts need to have a natural buyer, a natural seller, a commercial, and a producer of that product in order to facilitate a contract. — Terry Duffy

## Mentioned Terry Duffy, Tracy Alloway, Joe Weisenthal, Lynne Fitzpatrick, Don Wilson, Joey Chestnut, George Santos, LeBron James, Jerry Reinsdorf, Jeff Yan, Donald Trump, Paul Atkins, Carmen Rodriguez, Dashiell Bennett, Kale Brooks, Kevin Lozano, Scarlett Fu, Tom Keene, CME Group, Commodity Futures Trading Commission, Securities and Exchange Commission, DRW, Future Sports, Hyperliquid, Trade XYZ, Kalshi, Nasdaq, Federal Reserve, Georgetown University, GSK, Bloomberg, National Basketball Association, Major League Baseball, Chicago White Sox, Dodd-Frank Wall Street Reform and Consumer Protection Act, Commodity Exchange Act, Nathan's Famous Hot Dog Eating Contest, Case-Shiller, WTI crude oil

## Video description The Commodity Futures Trading Commission was practically brand new when Terry Duffy started working at CME Gropu almost five decades ago, and over the course of his career at the exchange, this legend of the trading world has seen an enormous amount of change when it comes to finance regulation, including the rise of prediction markets, 24/7 trading and perpetual futures. Duffy is set to transition out of his current position as CEO next year, and this conversation, recorded live at City Winery in Chicago, is a sort of exit interview. He tells us how regulation has evolved since the start of his time at the CME. We also talk about why he is against perps, the credibility issues prediction markets face, his definition of spreads versus futures, and what he wishes he knew at the start of his career, now that he is nearing retirement.See <a href="https://omnystudio.com/listener">omnystudio.com/listener</a> for privacy information.

[Source](https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/8a94442e-5a74-4fa2-8b8d-ae27003a8d6b/32688ea9-4cbb-4bb4-8b3c-b4e8018899f5/audio.mp3?in_playlist=982f5071-765c-403d-969d-ae27003a8d83)

中文简报

CME首席执行官达菲称永续合约是纯粹为杠杆而伪装的互换芝商所（CME）首席执行官特里·达菲（Terry Duffy）表示，离岸永续期货在法律上属于《多德-弗兰克法案》管辖的互换，其存在纯粹是为了引入极端杠杆，同时规避美国的保证金要求和税法。在一场广泛的对话中，特里·达菲对现代金融监管现状进行了评估，严厉批评预测市场和散户事件合约缺乏商业目的，并违反了CFTC关于防范操纵的核心原则3。他认为，永续期货在法律上构成了《多德-弗兰克法案》下的互换，并警告像Hyperliquid这样的离岸去中心化平台不当规避了机构合规和KYC义务。达菲还探讨了CME推出算力和GPU期货的努力、阻碍金融市场全面实现7×24小时运作的银行系统瓶颈，以及他个人的职业里程碑，包括1981年一次形成期性质的15万美元亏损，以及2020年疫情期间油价暴跌至-37.63美元带来的空前压力。特里·达菲正从芝商所集团（CME Group）首席执行官过渡为董事会执行主席，支持林恩·菲茨帕特里克（Lynne Fitzpatrick）接管领导职务。 (0:00) 达菲强烈批评预测市场和新型散户合约，认为缺乏天然商业对冲者的合约违反了CFTC防范价格操纵的核心原则3。 (5:00) 达菲指出，根据《多德-弗兰克法案》的法定定义，由于存在定期的资金费率现金流，永续期货在法律上属于互换，因而应遵守互换交易商规则并缴纳普通所得税，而非享受第1256条税收待遇。 (15:00) CME正与唐·威尔逊（Don Wilson）合作开发算力和GPU期货，但达菲透露，联邦政府已出于未指明的国家安全理由推迟了该产品的推出。 (25:34) 尽管7×24小时交易被视为不可避免，但达菲指出传统银行体系是主要障碍，因为当商业银行在周末关闭时，市场参与者无法在规模达76万亿美元的美国股市中预先注资以满足保证金要求。 (27:32)

Reading summary

CME Group CEO and Chairman Terry Duffy argues that modern financial markets are drifting toward fragility through regulatory shortcuts, unhedged novel contracts, and structural plumbing bottlenecks that fail to support continuous trading. Prediction Markets and Core Principle 3 Violations (5:00) Duffy criticizes the Commodity Futures Trading Commission (CFTC) for taking a 'ready, fire, aim' regulatory approach, noting his concern that out of numerous recent contract proposals, none appear to have been rejected. He argues that novelty event contracts—such as wagering on competitive hot dog eating or whether former Representative George Santos would attend the State of the Union—serve no underlying commercial hedging function. In Duffy's view, such products violate CEA Core Principle 3, which mandates that listed contracts must not be readily susceptible to price manipulation. Commercial Utility Versus Prop Betting in Sports (10:00) To distinguish legitimate financial risk management from retail gambling, Duffy emphasizes that viable futures require natural buyers, natural sellers, and commercial producers hedging real exposure. He contrasts individual player proposition bets, such as LeBron James's rebound counts, with institutional products like CME's collaboration with Future Sports. By establishing baseline index valuations (such as 7,500 points per team) alongside agreements with Major League Baseball and the NBA, franchises and corporate sponsors can hedge performance risk and monetize team valuations without selling equity. Legal Classification and Leverage Risks in Perpetuals (15:00) Duffy contends that perpetual futures are legally swaps rather than genuine futures contracts under Dodd-Frank statutory definitions. Because perpetuals rely on peer-to-peer funding rates where counterparties periodically exchange cash flows to track spot prices, Duffy asserts they meet the legal definition of swaps. He argues offshore platforms label them as futures to circumvent swap dealer registration, 5-day to 10-day margin rules, and ordinary income tax rates in favor of Section 1256 blended capital gains treatment. Furthermore, Duffy asserts that the real commercial driver for perpetuals is not rollover convenience, but the introduction of high leverage—sometimes reaching up to 250%—into new asset classes without mandatory Know Your Customer protections. Banking Bottlenecks Impeding 24/7 Market Structure (27:32) While Duffy considers 24/7 trading inevitable because market risk never halts, he identifies the legacy commercial banking system as the critical obstacle preventing round-the-clock trading across core institutional assets. Unlike relatively small cryptocurrency markets that can be pre-funded over weekends, the $76 trillion U.S. equity market and deep sovereign debt markets cannot be pre-funded on a Friday afternoon while clearing banks remain closed. Although platforms like Nasdaq prepare for extended 23.5-hour trading windows, Duffy maintains that clearing rails and real-time payments must mature before institutional plumbing can support continuous liquidity without systemic stress. Market Stress Lessons from Negative Oil Prices (32:20) Reflecting on four decades in trading and executive leadership, Duffy describes the April 20, 2020 collapse of WTI crude futures to -$37.63 per barrel as more unnerving than the 2008 financial crisis. While systemic federal backstops were assured during 2008, the 2020 pandemic triggered sudden physical storage exhaustion at delivery hubs. CME altered options pricing models ahead of expiration to accommodate negative strikes, allowing price discovery to accurately reflect the real physical holding cost of unwanted oil. Duffy concludes that enduring market expansion depends on codified congressional statutes rather than shifting administrative guidance. Key unresolved challenges include whether federal regulators will establish clear boundaries between hedging and wagering, and how payment rails will resolve liquidity constraints during non-banking hours.

精炼阅读摘要

CME Group 首席执行官兼董事长 Terry Duffy 指出，当前金融监管正滑向缺乏国会授权与严谨审慎的危险轨道，以预测市场与离岸永续合约为代表的金融创新本质上规避了核心法律原则，而兼顾风险防范的耐用市场结构才是长久繁荣的基石。预测市场乱象与核心原则的缺失 (5:00) Duffy 批评美国商品期货交易委员会（CFTC）近期监管呈现出“先开枪再瞄准”的倾向，在收到的众多合约申请中似乎未见否决。他列举了针对吃热狗大赛或议员是否出席国情咨文等博彩式合约，指出涉事前纽约州众议员 George Santos 自行下注反向事件后缺席，暴露出极其明显的操纵风险。他强调此类产品缺乏现货产业的真实对冲需求，公然违反《商品交易法》（CEA）核心原则 3 关于合约不得轻易被操纵的要求。他反驳了“引入知情者交易有助于价格发现”的说辞，认为公平交易的根基在于所有人同步获取信息，任何行政绕道设立的宽松特许最终都会随政权更迭被一笔抹消，唯有国会立法才能奠定稳固的市场规则。针对外界关于 CME 维护既得利益的指责，Duffy 强调传统合法期货必须具备商业实体、天然买家、卖家与生产商等完整产业生态，单一球员得分等个别数据下注对宏观经济毫无益处。为了展示合规创新的方向，CME 与澳大利亚机构 Future Sports 合作，将每支球队以 7,500 点为基准构建类似标准普尔 500 的综合表现指数，使球队所有者和赞助商能够在不出售股权的情况下管理企业业绩波动风险。CME 已就此类指数对冲工具与 NBA 和 MLB 签署合作协议，通过机构级框架服务企业风险管理，而非满足散户赌博需求。永续合约的法律定性与去中心化风险 (15:00) 针对在加密货币圈流行的永续合约（perps），Duffy 援引其参与 2010 年《多德-弗兰克法案》（Dodd-Frank Act）起草并作证 30 余次的经历指出，永续合约依靠交易双方定期支付资金费率（funding rate）来维持与现货挂钩，在法律定义上是不折不扣的互换（swap），绝非期货。离岸平台将其伪装成期货，意在规避严格的互换交易商注册义务、5 至 10 天的清算保证金要求和普通所得税率，转而套用《国内税收法》第 1256 条款的 60% 长期加 40% 短期资本利得优惠税率。此外，面对 40 万亿美元的主权债务风险对冲，机构必须依赖确定到期日而非浮动的资金费率，因此永续合约根本不具备主流机构适用性。对于 Hyperliquid 等离岸去中心化平台及政界试图将其引回美国的设想，Duffy 表达了强烈质疑。他认为其所谓“协议仅为底层管道、合规责任由部署者承担”的辩护违反了 CEA 核心原则 9 关于保障公平公开市场准入与机构自律监管的要求。这类平台缺乏客户身份识别（KYC），加之从 10% 到 250% 的极高杠杆以及链上自动强平机制，仅需一两个跳位波动就可能引发连环清算。Duffy 指出，参与者追求永续合约并非出于展期便利或理解资金费率，其核心动机单纯是为了规避限制以获取超高杠杆，并警告这种杠杆投机正在向体育和个股领域加速蔓延。全天候交易大势与传统银行结算瓶颈 (25:34) 在产品创新领域，Duffy 提到 CME 正与 Don Wilson 合作开发算力及 GPU 期货，他预计到 2030 年算力市场规模将数倍于加密货币，但痛斥现任政府以未加阐明的“国家安全”为由拖延批准，与国家大力发展人工智能及本土数据中心的战略互相脱节。与此同时，虽然 Kalshi 等平台获准上线算力预测，真正具备产业对冲效能的工具却面临阻滞。谈及 24/7 全天候交易趋势，Duffy 坦言由于全球风险永不停歇，全天候交易已不可阻挡，纳斯达克等场所也正推动在年底前实现美股 23.5 小时交易。然而，制约这一进程的核心瓶颈绝非撮合技术或交易员疲劳，而是传统的商业银行清算体系。加密资产规模较小尚可通过预付资金在周末维持运转，但在规模高达 76 万亿美元的美国股市及庞大的利率市场面前，没有哪家金融机构有能力在周五下午垫资锁定数百亿美元资金以应对周末银行停摆期的波动。在美联储及传统清算网络真正完成 24 小时现代化升级之前，全天候机构级交易仍将面临流动性与结算的现实阻碍。从爆仓经历到 2020 年负油价的极端考验 (30:47) 回顾自己长达数十年的职业生涯，Duffy 透露他在 1981 年初入交易行业时，曾用借来的本金遭遇爆仓并亏损 15 万美元，而当时他身无分文。这次毁灭性惨败塑造了他一生谨守的风控直觉与对退出路线的敬畏。他告诫年轻交易员与学生，在带着资本进入任何头寸之前，必须预先制定好明确的止损退出策略，并克服拒绝认错的虚荣心理，唯有懂得及时出场才能在金融市场长期存活。在历次重大市场危机中，Duffy 认为 2020 年 4 月的新冠疫情冲击远比 2008 年全球金融危机更为惊险恐怖。2008 年虽然局势混乱，但业内确信政府终究会出面兜底核心机构；而在 2020 年 4 月 20 日，WTI 原油 5 月期货由于实物储油设施全面告急、即期需求瞬间枯竭，破天荒跌至每桶 -37.63 美元结算。面对外界指责，Duffy 强调 CME 在合约交割前主动调整期权定价模型与结算架构以接纳负值，确保了期货能够真实反映现货持有成本并维系市场价格发现功能，而那种如在坐满观众的剧场里突呼火警般的系统性压力，成为了他职业生涯中最具挑战性的时刻。 Terry Duffy 在准备卸任首席执行官之际，重申了衍生品市场必须恪守实体经济对冲属性与法定监管边界的立场。随着算力资产化和 24/7 交易的推进，如何在追求流动性创新的同时解决传统银行业结算短板，并遏制纯杠杆与操纵风险，仍是留给金融监管者与下一代交易所管理层的关键课题。

Source quotes

[5:00] Terry Duffy: The way we grow good, strong, confident markets is to have a good balance of regulation, not to have no regulation. No regulation is on borrowed time. [30:00] Terry Duffy: Markets are going 24-7, but the infrastructure has to support it. [30:47] Terry Duffy: If you can have an exit strategy, you will be more successful as you enter into anything. [25:34] Terry Duffy: The GPU market will be multiples of the size of crypto by 2030. For sure. [10:00] Terry Duffy: most contracts need to have a natural buyer, a natural seller, a commercial, and a producer of that product in order to facilitate a contract.

Original transcript

[0:00] There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays markets and research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee. So search Barclays Brief wherever you get your podcasts. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at chatgpt.com by selecting Work Mode, available on Plus and Pro plans. If you listen to financial news, you know a lot of time is spent thinking about what's next. The next opportunity. The next investment. The next move. But sometimes what matters most is being ready for what you never saw coming. For more than 75 years, Cincinnati Insurance has worked with independent agents to help protect businesses, homes, valuables, and more. Because planning for the future isn't only about knowing what's next. It's about making sure you're ready for what you can't predict. Let Cincinnati insurance make your bad day better. Find an independent agent at CINFIN.com. Hello and welcome to a very special live taped episode of the Odd Thoughts podcast. I'm Tracy Allaway. And I'm Joe Weisenthal. Joe, we are here in Chicago. Great city. A very special show. It's a beautiful city and a huge trading capital in the world as well. That's why we love coming back here year after year to do shows here. That's right. So I'm very Happy to say we do, in fact, have the perfect guest. We're going to be speaking with Terry Duffy. He is, of course, the CEO and chairman of the CME Group. That's right. Longtime chairman and CEO. Markets have changed so much since the start of his tenure. So looking forward to learning what he's learned throughout his career. All right. So take a listen. Terry, thank you so much for coming back on OtLots. Thank you. Thank you for having me. I really appreciate it. Nice to see you both. You know, I mentioned you are, of course, CEO and chairman of the CME, but you're about to transition to a new position next year. You're going to become executive chairman of the board. Sort of a retirement. How should we think about this? A retirement. I'm a big believer in that. I think that you need to make sure you have good smooth transition. I've been at CME for 46 years, got my first job for $56 a week. I've been the chairman since 2002 when I took CME public, and I've been doing this an awful long time and now being CEO for all these years. So I think it's really important to have a good smooth transition. I'll stay on as executive chairman to help Lynn Fitzpatrick through the. initial phase of it and if needed I'll be there but if not She'll win the firm. All right. Well, we're going to frame this then as a sort of exit interview for you, and we expect you to tell us all the really good war stories before you leave. I can't yet. I'm still CEO, so I've got to be somewhat careful of the public company. All right. Let me put it a different way. So you've been at the CME since, I think, 1980. So you've been working for… five decades you've been in markets regulated by the CFTC. For those five decades... How has regulation changed for you? How would you characterize the evolution? It's amazing. I was just talking to my friend Don Wilson, who will be out here shortly, and talking about the early days of when we both joined. Donny was 21, I was 22, but I'm 10 years older than Don. So anyway, when we look at the regulation and what it was, I mean, the CFTC was basically brand new. It was 1973, '72 area came into play. And it was basically a principles-based oversight agency for agricultural products. And then all these new innovations come along the way, you know, from financial futures, the stock equity indexes, and now the cryptocurrency and everything else that's going on. So it's changed dramatically throughout the years. And then, of course, we've had some situations with bad behavior in 2008 in the financial crisis due to the leverage issue on the housing market. And you go through a whole iteration of change again through Dodd-Frank. And now we are still, even 16 years later, still trying to figure out parts of Dodd-Frank. So it's pretty [5:00] Amazing how far it's gone. I was trying to workshop this question with Tracy earlier and come up with a polite or sort of, politic way to put it. But, you know, we live in a time where like an agency that used to regulate agriculture futures is now nominally regulating what a lot of people would say is like sports betting, but they call it trading and so forth. And, you know, there's all these new instruments, offshore instruments that people can access via crypto and so forth. The impolite, impolitic question is like, Are there any laws anymore? Because it feels like that. It really feels like that. Are there still financial regulations and laws? It's worrying that was the workshop. It does feel a bit of a ready fire aim strategy going on right now where anything can go. So it's very disconcerting. I'll give you a couple of statistics, which really trouble me. that have been submitted into the Commodity Futures Trading Commission. Not one of them has been denied. Now, how can it be that not one of them has been denied? So when you look at somebody's prediction markets, I've made fun of them, and people say, will you please stop bringing this up. I bring up the approved contract on predictions on Nathan's hot dogs. How many hot dogs did Joey Chestnutty die? I have to... ask, what's the economic impact of that contract being out there? And how is it not in violation of core principle three, which is susceptible, readily susceptible to manipulation? George Santos, is he going to show up at the State of the Union address when President Trump was there, the former disgraced congressman in New York? Well, he bet against himself and didn't show. So how is that not a susceptibility? I mean, the teleprompter for President Trump, So to answer your question, is there any regulation? Yes, there's regulation. And it's extremely important. The way we grow good, strong, confident markets is to have a good balance of regulation, not to have no regulation. No regulation is on borrowed time. There's no question about it. Always has been, always will be. So, you know, what's going on right now at the agency, they are circumventing basically acts of Congress. it's at the CFTC or SEC. Well, I remind market participants, those are rules and regs of the agency that can be easily swiped away by a wipe of a pen when the next administration comes in. We all remember when President Trump came into office this last time, and he had a big show about how his executive orders were getting rid of everything that Joe Biden did. Well, the next president can do the same exact thing. So these are not sustainable. Good, smart regulation, Thank you. So, I think to answer your question, is there any regulation? Yes. Is some of it ridiculous? Yes. But it doesn't mean there's no regulation. Okay. Devil's advocate question, but the prediction markets would respond that like, well, you know, insider trading on the platforms, maybe it's a good thing because you get informational value from it and everyone benefits from having this informational value. I'm not sure there's much informational value embedded in knowing how many hot dogs a contestant is going to eat. But that's the typical response. What do you say to that? Well, I think if I heard your question right, insider information is good. Is that what you said? have a hard time believing that for the average participant, especially that doesn't have that information, they would agree with you. And to think that certain people have, this is what we've all been fighting for through technology, is they have the ability for all of us to have the information at the same time so we can participate. I don't have as much money as my dear friend Don Wilson is coming out here, but I might have the same information he gives. I just don't, can't So to say that insider information could be a good thing on anything is offendable to me as a guy who's traded markets and run markets for the last 25 years. I just don't see any place in credibility if you're going to grow anything by saying you get to know, you get to know, but I don't get to know. And it's not too dissimilar than the president of the United States with Truth Social today charging $100,000 to give information faster. to give information to all of us at the same time, not to have a feed to get your information quicker so others can act on it. So I have a real problem with some of this stuff. The guests in our live show tonight get information before the people who have to listen to our recording, so they pay for it. Did anyone start a recording? I didn't give it a minute. I gave an opinion. Yeah, and it's not market-moving hours yet currently. But another thing that they would say, [10:00] Thank you. that if we were to have a prediction markets person, they would say, you have a legacy business to protect. And they say, well, they would say, yeah, he talks about the importance of good durable rules, but prediction markets in theory could cut into CME business. How do you think about like, what do we, okay, sure, CME has a business. What do we lose in, in the investor community, in the financial community, more broadly, if there continues to be this degradation of regulations. Well, I mean, you lose a lot of things, but are you talking about prediction markets in general? I'm talking about, like, all of it. And, like... beyond like what are the costs that the public is going to pay? First of all, like these sort of CFTC rules. I'm not opposing some of these markets. I'm opposing the ones that violate the Commodity Exchange Act or core principle, which is core principle three, which is susceptible, at least susceptible to manipulation. You cannot list those contracts. And I just gave you a few examples of that. It doesn't mean that I'm against all prediction markets. If you look at sports, I believe sports predictions is gambling. I don't think there's any way around it. Almost everyone agrees with you. Well, they didn't for a long time. But from my standpoint, if LeBron James gets two or three rebounds again, what's the economic impact to the three of us on this stage or the folks sitting here in your audience tonight? They have none unless they're on the yes or no side of that trade. That's it. And most contracts need to have a natural buyer, a natural seller, a commercial, and a producer of that product in order to facilitate a contract. And that's how traditionally most contracts get approved. Otherwise, they should not be approved. So I think that the credibility of the marketplace is really important. Now, we started something with a company called Future Sports. Future Sports out of Australia is a great firm, and they're doing amazing things. If you're saying that you don't like, you think these are Not. regulated and they should be regulated by the federal government, not the states. What about future sports? Well, future sports is an index. It's very similar to the S&P 500. Every team starts out at 7,500. You go up and down depending on performance. But at the same time, it helps people who own these teams monetize the value of their teams without selling them. So a great example. Chicago White Sox. We were fortunate enough to be a sponsor of the Chicago White Sox this year, and they had an amazing year that no one thought they were going to have. Um, But... My dear friend, Jerry Reinsdorf, probably could have charged me a lot more if I would have had a vehicle to lay off some of that risk to put a patch on his sleeve. But that market wasn't there. So there's ways to do that. And you can take that through the economic system of sports. And now we just did a deal with the NBA. We've done a deal with MLB. And these guys have done an amazing job. So there's a value there to the ecosystem. It's just not a value to you and I. And that to me is a big difference. Thank you. There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts. Some people treat ChatGPT like some kind to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your projects. Get started at ChachiPT.com by selecting Work Mode, available on Plus and Pro plans. By the time I hit my 50s, I'd learned a few things, like how family is precious. Work can always wait. And 99% of people over 50 already have the virus that causes shingles. Not everyone at risk will develop it, but I did. The painful, blistering rash disrupted my life for weeks. Don't learn about your shingles risk the hard way. Talk to your doctor or pharmacist today. Sponsored by GSK. Artificial intelligence is transforming how businesses operate. But what will it take to build a true [15:00] On October 28th in Boston, join the Bloomberg Tech Briefing, building the agentic enterprise to hear business and technology leaders explore the strategies needed to build cyber resiliency and secure trusted AI systems for the agentic AI era. Proudly sponsored by HPE. Learn more and register at BloombergLive.com slash Bloomberg Tech Briefing. Can we talk about perpetual futures in addition to prediction markets? Sure. I know we're going to have Don Wilson on next. He has a slightly different opinion to you when it comes to perps. He's wrong, though. We've got to bring him out here. That's it. Anyway. All right. Well, I mean, talk to him. I'm teasing, Don. Don. Why is he wrong? And also, I think I just saw that CME decided to shell plans for a 24-7 oil PERP contract due to industry pushback. What was the pushback? OR MAY NOT KNOW GET WHAT'S CALLED 1256 TAX TREATMENT WHICH IS 60 LONG TERM, 40 SHORT TERMS ON GAINS BECAUSE THERE'S NO CAPITAL GAINS IN FUTURES CONTRACTS. SWAPS ARE DONE AT ORDINARY taxed at ordinary income. Swaps also comes with five days margin to clear And if you don't clear, it's a 10-day requirement. You also have requirements as a swap dealer to register with the government. There's other things that you need to do to be in compliance with that. Why is that? Because in Dodd-Frank in 2010, I testified over 30 times of what a swap is and what a future is. And what perpetuals have is what's called a funding rate. I'll get to my 24-7 oil, but I did not list the perv. I didn't put for the perv. I just put for 24-7 oil on a 10. 10-barrel contract, very small contract, just to compete with some of the platforms that are being traded overseas, which are supposed to be illegal for U.S. participants. But if you have a telephone with a VPN on it, you have access to the market. And no one's, to your earlier point, who's policing that? Nobody. So anyway, the funding rate of a perpetual, is when two parties pay each other. That's how this all perpetual works. If you're long and the market goes down, The shorts... are to be paying the longs. And if you're long and the market goes up to short, so it's vice versa. So that's how they keep the market tied to the spot trade. in the definition of a swap, Anytime two parties pay each other, it's deemed a swap. So they circumvented Congress. That's why I have a problem with perpetuals. It's everybody thinks, well, they have no expiration date. That's a whole other story that people can't manage risk with no expiration. expiration dates. In today's world, we have $40 trillion of debt. There's corporations that have massive loans against futures positions, cash positions with their customers. In order to do that, they need to have a date certain when they're going to do it. And a funding rate, the way it works to mark the funding rate, it can happen either at one time a day, twice a day, every hour. Who makes that decision? So institutions go, this is impossible for us to trade. So I'm not a supporter of. the perpetual market, the way it's drafted today, and if they want to list them as swaps, then so be it, but then there's a whole different set of qualifications you have to have to participate in the swap market, because that's what happened after the 2008 crash. Speaking of overseas platforms that people access with a VPN, incidentally, and if you haven't listened today, we did have an episode out with Jeff Yann, the founder of Hyperliquid, which is the elephant in the room here. So people can check that out. President Trump specifically said, like, oh, we're going to bring Hyperliquid. to the U.S.? Do you have a theory for what's going on? I mean, for those listening to the recording... You think President Trump knows a lot about hyperliquid? Just curious. I'm an unbiased journalist. I don't say things without the fact. I'm just an unbiased CEO. I hear you, but come on. Well, do you have a theory for what's going on? Why do you think the president is actively courting this overseas blockchain-based perps platform? Well, here, I did hear what Jeff had made some comments on your program, essentially saying he does not need to be regulated, that the users need to be regulated. The deployers. The deployers. So if you're trade XYZ, which is 98% of users, hyperliquid business is done by trade XYZ. The other is on their crypto [20:00] franchise that's the only thing that they list at Hyperliquid is crypto and then Trade XYZ lists the other products on the platform. So they're basically the plumbing is what Jeff's argument is. I've talked to Jeff about this. I actually like him. I think he's a brilliant, brilliant guy. But at the same time, you know, There's no KYC or no your client. That's an issue. There is situations on the blockchain where there's auto liquidation, which is also a problem. There's highly leveraged products. These things can cascade and create market moving events. because of the high leverage and the small amount of dollars in there. So when you look at some of the leverage products being traded on Hyperliquid's platform, their leverage can go anywhere from, say, 10% to 15% to 250%. So you think about 250% leverage on certain products. I mean, it doesn't take more than a tick or two to start to get somebody out one way or the other. And if they take you out, they might take the next guy out and you have a cascading up or down. That's not a good marketplace. I think Jeff needs to understand if he's going to compete and wants compete in the United States and he's got the president suggesting he should, then he's going to have to understand how to compete under U.S. law. Because what he's saying does not comply with U.S. law. It's actually in violation of core principle nine. And I can go through all the nuances of core principle nine, but it's basically fair and ready market access to all. But you have an obligation. to make certain that you're policing these markets as an institution, not just as a user. So we have no KYC, so we don't even know who's on the platform. But at the same time, he's saying, I'm not responsible. You can trade on it. So you're trading with people that maybe shouldn't even be participating, and they're affecting that market outcome. Which way? I don't know because there's no KYC. We don't know who they are. So there's a lot of violation of U.S. law for him to deploy what he was suggesting on your show. So I'm going to ask another devil's advocate question. I want to make clear, devil's advocate, please don't come at me. But just on the leverage point. Don't say perp. Just on the leverage point. I mean, Cal, she says they limit leverage to like six times on their platform. The CFTC chairman has talked about if they do it in the U.S., they will also have leverage limits. So as to gradually introduce them to a U.S. audience, I guess, is is a leverage limit not a good enough safeguard in your mind? I mean, you can say that you'll have limits, but I don't know what they are. So... There's certain limits. I mean, when you look at what Bitcoin is being traded on CalShift, they've kept the leverage basically where CME is at on their leverage for our Bitcoin. So not too dissimilar. I don't think that was a mistake. So perpetuals, as they know, are not being introduced to the United States because there's no expiration date. OR BECAUSE PEOPLE UNDERSTAND THE FUNDING RATE. THEY'RE TRYING TO BE BROUGHT HERE FOR LEVERAGE AND LEVERAGE ONLY. AND IF THAT'S NOT THE CASE, CAN YOU TELL ME WHY FIRMS ARE TRYING TO GET LEVERAGE ON PREDICTION MARKETS ON SPORTS NOW? THAT'S THE NEXT THING THEY WANT TO DO. IF YOU GET INTO SINGLE STOCK, perpetuals, like we have single stock futures, they want to have single stock burps. So, the thing what they want is the leverage on those products. And to me that could be very catastrophic from a risk management standpoint if you don't know what the leverage is. So I think it's just trying to open the door to bring them in for leverage because I don't know a retail participant that says, I really am not going to get in this trade because I'm worried about the expiration or the roll date. Retail participants, with all due respect, that's me as well, we don't trade. Futures. for six months, even three months at a time or a month at a time. We're probably in and we're out more than not. It doesn't make any sense to me that... The funding rate associated with that is also tied just to the spot price. It doesn't it's not tied to the future price. So there's a lot of problems with what they are saying here as it relates to this product. So I think it's an issue. Thank you. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done. ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get [25:00] Start it at ChachiPT.com by selecting Work Mode, available on Plus and Pro plans. By the time I hit my 50s, I'd learned a few things, like how family is precious. Work can always wait. And 99% of people over 50 already have the virus that causes shingles. Not everyone at risk will develop it, but I did. The painful, blistering rash disrupted my life for weeks. 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Have you built up a good intuition for like, you know what, this future is going to be a ghost town or this future is going to like, this is really going to attract? Do you have a good feel for that? You know, you try to think you do. Sometimes what's old is new, what's new is old. So I'll give you an example. the rate market traded and they became almost a useless product. But as the overnight lending rates started to get more and more active, especially during COVID, I said, we should probably trot these back out right now. And they became quite successful for a while again. So we brought out that product again. When you talk about GPU futures, when Don originally introduced me to this product, I mean, there's people saying that, well, we're not quite sure it's an asset class. Well, it's already over a trillion dollars. Crypto is deemed an asset class and that's less Thank you. The GPU market will be multiples of the size of crypto by 2030. For sure. And for that industry and for the administration to be holding this back right now, they're saying it's for national security issues, which I have no idea what they're referring to. Why is it national security? If the president truly wants to have artificial intelligence, we want to be the leader in it. We want to be the leader of data centers. components. This makes no sense to me why they're holding these products back. This is the funny thing. Like, Kelshi, you mentioned, it's like, oh, they allow the hot dog contract, and they allow the... you know, speech thing. But then they nicked the, they're like, no, no. But what they didn't do with Kelsey is Kelsey has a prediction market on compute and they didn't make them take that down. I thought they did make them take that down. No. Okay. They did not. Can we go back to 24-7 trading for a second? Because this came up on our hyper liquid episode. And I think I said something like it feels kind of inevitable at this point. There seems to be a lot of demand out there. A lot of guys, in their basement, I guess, who want to trade stuff at 2 a.m. in the morning. Guys and girls. Guys and girls, sorry. My question is, like... Who else other than the guys and girls in the basement and the exchange has to stay awake all weekend to make this actually happen? I believe, to be honest with you, and I've been saying this for quite some time, 24-7 is inevitable. And you can fight it. You can say, I don't like it. I don't want to stay up at a desk. I don't want to stay up at 2 in the morning. But risk doesn't know what time of day it is. Risk doesn't happen every day ends in a why. that's going to come. The biggest problem with 24-7 is the banking system. The banking system needs to be available 24-7. We're talking about an equity market in the United States alone. It's a $76 trillion market. There's nobody on the planet that could fund, pre-fund on a Friday, a $76 trillion market as the banking system is closed. Now that's an extreme. I can pre-fund a crypto market. The crypto market's small, so we do, and we trade it 24-7. But there's a lot of that you cannot trade, rates and probably for sure equities until the banking system decides to go 24/7. Now there's real time payments, there's some other things that the Fed is doing. I spent an hour and a half with Chair Atkins on Tuesday talking about a couple of these things. But it's just not enough. [30:00] unless we have a true 24-7 banking system, then we will have 24-7 markets. And we may not like it, and we're going to have to be careful because there will be pockets of illiquidity. But there's pockets of illiquidity today, intraday as well. So that's nothing new that our industry is not used to. So I think that's what we're going to see. We're going to see 23-5. on the equity markets coming up by the end of the year. So we'll see how that works. goes forward. That'll be the first time that you'll see cash equities trading 23.5. I think Nasdaq's getting ready to go. So we're going to see some of these things that we've never seen before, but it's really important for people to understand that Markets are going 24-7, but the infrastructure has to support it. What's one thing If you could go back and talk to yourself at the start of your career, a piece of advice you'd give to yourself based on what you know now. You know what, I've been pretty fortunate. When you go broke when you're a kid, in 1981, I lost $150,000 and I didn't have a dollar. And that was borrowed. So you taught me a lot of discipline and it's helped me deploy. What I have done today in my trading career and as an executive running a company like CME Group and I've been blessed. So what would I tell myself? I would say. You know, don't lose your moral compass and be a little bit patient. And, you know, everybody can get into a trade, but it's really hard to get out. So I like to tell young people I spoke at Georgetown the other day, too, and I like to say there's a sign up there that says exit. I said it's a really important sign for a lot of reasons. And the exit sign is important because anybody can get in. But before you get into something, you should know how to get out of it. Whatever you're doing in life. If you can have an exit strategy, you will be more successful as you enter into anything. So I think a lot of people forget that because and so I would tell my younger self is don't forget that you can. It's okay to be wrong. And human instinct does not like to be wrong. So it's really hard to accept when you're wrong. So I think if you understand the exit strategy, you'll be successful going forward. I know the buzzer went off, but I'm going to squeeze in one more question just because we teased war stories with Terry Duffy. If you look back over your career, I can think of so many crisis moments. I mean, really, just in the past 20 years or so, we had 2008, obviously 2020, negative oil, all that stuff. What was the most fraught or. scariest moment of your career? You know, it's funny because in the crisis of 2008, I was, you know, I started, I became chairman in 02. And that was frightening to me just to begin that. But the 08 crisis was something that you kept thinking, this can't be real. And it's, But I really believe in my heart of hearts that no matter how bad this is, the United States government had to step in. And I think we all knew that. The question is how many dominoes would fall first. So that didn't scare me as much. I think that the pandemic happened. would be one of the things that scared me the most because I think when you yell fire in a crowded theater, that's what it felt like to me. And I was on TV on the roof of April 20th of 2020 defending minus $3,750 of oil. And I was being crucified why we let oil go to a negative amount. Well, what we did was we had our options priced at negative strikes because we could kind of see this coming. Price discovery, whatever it was. New York harbors filled. There's nowhere to put the oil. There's no demand. I It dried up in a nanosecond. And to me, that was frightening because you didn't know how long that was going to last. So that was probably the biggest scare I've ever had is even bigger than the OA crisis. All right, Terry Duffy, a man who knows how and when to exit. We appreciate you coming on. Thank you very much. That was another episode of the Odd Thoughts podcast recorded live in Chicago. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armand, Dashiell Bennett at Dashbot, Kale Brooks at Kale Brooks, and Kevin Lozano at Kevin Lloyd Lozano. slash online. And if you enjoyed this conversation, then please leave us a positive review on your favorite podcast platform. If you're watching the video, then please like or leave a comment, or better yet, subscribe. Thanks for watching and listening. [35:00] Thank you. By the time I hit my 50s, I'd learned a few things, like how family is precious. Work can always wait, and 99% of people over 50 already have the virus that causes shingles. Not everyone at risk will develop it, but I did. The painful, blistering rash disrupted my life for weeks. Don't learn about your shingles risk the hard way. Talk to your doctor or pharmacist today. Sponsored by GSK. Here at Bloomberg, we spend all week talking about markets and the economy. And on Fridays, we help you make sense of what it all means for your money. Bloomberg Money is our weekly look at the forces shaping your financial life. We explore personal finance, investing, and retirement with leading economists, strategists, and wealth managers. 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