What Are Perpetual Futures Markets? A Beginner's Guide
Mike Goodpaster Last Verified
29/06/2026
Perpetual futures are contracts that let you take a leveraged position on an asset's price without ever expiring. You go long if you think the price will rise, short if you think it will fall, and you hold the position for as long as you want. There is no settlement date, no forced rollover, and no need to own the underlying asset. Until 2026, these contracts were almost exclusively available on offshore exchanges outside US jurisdiction. That changed when Kalshi became the first company in US history to offer CFTC-regulated perpetual futures.
This guide covers how perpetual futures work, the mechanics of funding rates and liquidation, how they compare to other ways of trading crypto, worked examples, and where to trade them in the US today.
How Perpetual Futures Work
The core concept is simple. You open a position by depositing margin, a fraction of the total position value, and the exchange gives you leveraged exposure to the price of the asset. If you go long and the price rises, you profit. If it falls, you lose. If you go short and the price falls, you profit. If it rises, you lose.
What makes perpetuals different from standard futures is the absence of an expiration date. A traditional futures contract settles on a specific date and requires you to either close the position or roll it into the next contract period. A perpetual has neither. You hold it until you choose to close it, as long as your margin stays above the required minimum.
Because there is no settlement date, a separate mechanism is needed to keep the perpetual contract price aligned with the underlying spot price. That mechanism is the funding rate. Our guide on how prediction market contracts work covers the broader category of derivative products if you want more context on how perpetuals fit in.
The Funding Rate Explained
The funding rate is the heartbeat of a perpetual futures contract. Every eight hours, a small payment is exchanged between traders on opposite sides of the market. The direction of the payment depends on whether the perpetual is trading at a premium or discount to the spot price.
- If the perpetual trades above spot, there is more demand from longs than shorts. Longs pay shorts. This makes it more expensive to hold a long position, which pushes the contract price back toward spot.
- If the perpetual trades below spot, there is more demand from shorts. Shorts pay longs. This makes holding a short more expensive and pushes the contract price back up toward spot.
The rate is typically small in calm markets, a fraction of a percent per eight-hour period. In strongly trending markets it can become more significant. Because funding is charged three times per day, a high funding rate compounds quickly for traders holding large leveraged positions over multiple days.
Kalshi displays the current funding rate and a history of past rates on each perpetual's market page. Reading the funding rate before opening a position tells you the ongoing cost of holding it.
Leverage and Margin
Leverage is what makes perpetual futures both powerful and risky. It lets you control a larger position than your capital alone would allow, amplifying both gains and losses by the same factor.
If Bitcoin is trading at $100,000 and you have $5,000 to invest:
- At 1x leverage (no leverage): you control $5,000 of Bitcoin. A 10% move earns or costs $500.
- At 5x leverage: you control $25,000 of Bitcoin. A 10% move earns or costs $2,500.
- At 10x leverage: you control $50,000 of Bitcoin. A 10% move earns or costs $5,000, your entire stake.
Higher leverage compresses the distance between your entry price and your liquidation price. At 10x leverage, a 10% adverse move wipes out 100% of your margin. At 50x, a 2% adverse move does the same.
Perpetuals on Kalshi use an isolated margin model. The margin you allocate to a specific position is separate from the rest of your account. If a position is liquidated, only the margin set aside for it is lost. Your other funds are not affected.
What Liquidation Means
Liquidation is what happens when a position moves so far against you that your margin can no longer cover the loss. The exchange's clearing system closes the position automatically to prevent your account from going negative.
There are two margin levels to know. Initial margin is what you need to open a position. Maintenance margin is the lower threshold you must stay above to keep it open. When your position's losses bring your remaining margin below the maintenance level, liquidation begins.
In fast-moving markets, liquidation can happen quickly and the execution price may be worse than the theoretical liquidation threshold. This is called slippage, and it can mean the actual loss is slightly larger than the calculation suggested. Kalshi's clearinghouse, Kalshi Klear, handles liquidations within the regulated exchange framework.
Worked Examples
These examples use Bitcoin to illustrate the mechanics. The same logic applies to any perpetual futures contract.
Example 1: Going long with 5x leverage
Bitcoin is at $100,000. You deposit $2,000 in margin and open a long position at 5x leverage. Your total position exposure is $10,000, representing 0.1 BTC.
Bitcoin rises 10% to $110,000. Your $10,000 position is now worth $11,000. Profit: $1,000 on $2,000 of margin, a 50% return. You close the position and receive $3,000 total (original margin plus profit), minus any funding payments during the hold period.
Bitcoin falls 10% to $90,000. Your $10,000 position is now worth $9,000. Loss: $1,000, half your margin gone. You are not liquidated yet. At 5x leverage your liquidation price is roughly 20% below your entry ($80,000). You can add margin, close the position, or hold and hope for recovery.
Example 2: Going short with 10x leverage
You think Ethereum at $3,000 is overvalued. You deposit $1,000 and open a short position at 10x leverage. Your total exposure is $10,000, representing roughly 3.33 ETH.
Ethereum falls 8% to $2,760. Your short has gained $800. That is 80% return on $1,000 of margin. You close the position and receive $1,800 total minus funding costs.
Ethereum rises 5% to $3,150. You have lost $500, half your margin. At 10x leverage you are now close to liquidation. If ETH rises another 5% your position will likely be liquidated and you lose the remaining margin.
Perpetual Futures vs Other Ways to Trade Crypto
Understanding how perps compare to the alternatives helps you decide which tool is right for your situation. For a broader comparison of prediction market products versus other trading formats, see our guide on how prediction markets differ from other financial products.
| Feature | Perpetual futures | Spot crypto purchase | Event contracts (Yes/No) |
|---|---|---|---|
| Own the asset | No | Yes | No |
| Can profit from price falls | Yes (go short) | No | Yes (buy No contracts) |
| Leverage available | Yes (up to 50x on BTC) | No (unless borrowing) | No |
| Expiration | None | None | Yes (fixed date or condition) |
| Ongoing funding cost | Yes (every 8 hours) | No | No |
| Maximum loss | Isolated margin (liquidation risk) | Full purchase price | Amount paid for contracts |
| Settlement | Mark-to-market continuously | No settlement, you hold the asset | $0 or $1 at resolution |
Where to Trade Perpetual Futures in the US
Until 2026, US traders who wanted perpetual futures had to use offshore exchanges operating outside US jurisdiction, which meant no regulatory protection, no KYC requirements, and no recourse if something went wrong. The CFTC opened a regulated onshore path for perpetuals in May 2026. Two prediction market sites have announced or launched perpetual futures products as of mid-2026.
Kalshi
- Sports, politics, and crypto predictions
- Economics, culture, and climate events
- Optimized Android and iOS apps
- 2% debit card deposit fee
Kalshi became the first company in US history to offer CFTC-regulated perpetual futures when BTCPERP launched on June 3, 2026. The product expansion followed CFTC approval under Commission Regulation 40.3, the voluntary review route that required case-by-case approval rather than self-certification. In its first week, BTCPERP crossed $1 billion in cumulative volume. Kalshi's perpetuals lineup has since expanded to include Ethereum, Solana, XRP, Dogecoin, and additional altcoins, with 13 CFTC-approved contracts available as of mid-2026. All contracts are cash-settled, use CF Benchmarks Real-Time Indexes for price reference, and carry an eight-hour funding rate. Leverage caps vary by asset, reaching up to 50x on Bitcoin.
Kalshi is the only US prediction market site where you can currently trade both regulated event contracts and regulated perpetual futures in one account. The $10 welcome bonus applies to event contracts trading. Perpetuals require a separate margin account and a suitability check within the app before access is enabled. The Kalshi app is available on iOS and Android with full perpetuals functionality including position monitoring, funding rate display, and limit order support.
Polymarket
- Polymarket is live in the USA
- Easy pick-up-and-trade mechanics
- Sign-up rewards may be available
- Beginner-friendly platform
- Dynamic trading topics
- Long wait list to join
- High regulatory scrutiny
- Not all markets are available yet
Polymarket announced its perpetual futures product on April 21, 2026, positioning it to compete directly with Kalshi and offshore exchanges like Hyperliquid. The planned lineup covers cryptocurrencies and equities including BTC and NVDA, with up to 10x leverage. As of mid-2026, the product is in pre-launch phase with a waitlist open for priority access. Full availability had not launched at the time of writing. Polymarket's announcement emphasized a 24/7 trading environment and the ability to apply directional market views to leveraged positions across a broader range of asset classes than event contracts alone.
Polymarket's existing products are fully live: event contracts covering crypto, politics, sports, economics, and culture are available now to verified US users. New users who deposit $20 or more receive a $50 trading bonus on the existing event contracts platform. The iOS app launched in May 2026.
Key Risks to Know Before Trading Perpetuals
Perpetual futures carry substantially higher risk than event contracts or spot crypto purchases. These are the most important risks to understand before opening your first position.
Liquidation can happen faster than you expect
In fast-moving crypto markets, the distance between your entry price and your liquidation price can be covered in minutes at higher leverage levels. A 10% move against a 10x leveraged position eliminates 100% of the margin. Unlike event contracts where the maximum loss is the amount you paid, a leveraged position can move to zero quickly. Always know your liquidation price before you open a position and have a plan for adding margin or closing if the market moves against you.
Funding rates compound over time
The eight-hour funding rate may seem small in isolation. Over a week of holding a leveraged position in a market with a consistent funding rate, those small payments add up. A trader can be directionally correct but still lose money if funding costs erode the return. Monitor the funding rate before entering and factor it into how long you plan to hold.
Higher leverage is not always better
It is tempting to use maximum available leverage to maximize potential gains. In practice, higher leverage dramatically reduces your margin for error. Professional traders in perpetual futures markets typically use far less than the maximum available leverage because it gives them more room to manage positions through adverse moves without being liquidated. Starting at 2x or 3x while learning the product is sensible.
Perpetuals are a different product from event contracts
If you are used to Kalshi or Polymarket event contracts, perpetuals require a mental reset. Event contracts have defined maximum loss, no ongoing costs, and a binary outcome. Perpetuals have none of those properties. The suitability check Kalshi requires before enabling perpetuals access exists for this reason. Do not assume that being a successful event contract trader means perpetuals will feel natural immediately.
The Bottom Line on Perpetual Futures
Perpetual futures are the most widely traded instrument in global crypto markets, and regulated onshore access in the US is now a reality for the first time. The mechanics are not complicated in principle: leveraged directional exposure, an eight-hour funding rate to keep the contract anchored to spot, and no expiration date. The risk profile is substantially higher than any other product discussed on this site, and the funding rate adds an ongoing cost that is easy to underestimate in a trending market.
For traders already comfortable with crypto markets and familiar with leverage, regulated US perps on Kalshi represent a genuine product improvement over offshore alternatives: CFTC oversight, segregated funds, mandatory KYC, and the same funding mechanics offshore traders are used to. For traders new to prediction markets, starting with event contracts and building familiarity with how binary contracts work is the more sensible path before adding leverage to the mix. For a broader look at both product types on Kalshi, see our full Kalshi review.
Perpetual Futures FAQ
What is a perpetual futures contract?
A perpetual futures contract is a leveraged derivative that tracks the price of an asset with no expiration date. You can go long to profit from price rises or short to profit from falls, and you hold the position for as long as you want as long as your margin stays above the required minimum. A funding rate mechanism keeps the contract price aligned with the underlying spot price.
What is the funding rate on a perpetual futures contract?
The funding rate is a periodic payment exchanged between long and short holders, typically every eight hours. When the perpetual trades at a premium to spot, longs pay shorts. When it trades at a discount, shorts pay longs. The rate keeps the contract price close to the spot market price and represents an ongoing cost of holding a leveraged position.
How is a perpetual different from a regular futures contract?
A regular futures contract has a fixed settlement date. At expiry, the position closes and the difference between the entry price and settlement price is paid out. A perpetual has no settlement date, so you never have to close or roll the position unless you choose to. The funding rate replaces the convergence mechanism that traditional futures use at expiry.
What is liquidation in perpetual futures?
Liquidation is the automatic closure of a leveraged position when your remaining margin falls below the maintenance requirement. It happens because the market has moved far enough against you that your collateral can no longer cover the loss. The position is closed at the best available market price, and you lose the margin allocated to that position.
Where can I trade regulated perpetual futures in the US?
Kalshi is currently the only prediction market site with live CFTC-regulated perpetual futures in the US. BTCPERP launched in June 2026 and the lineup has since expanded to 13 contracts including ETH, SOL, XRP, and DOGE. Polymarket has announced a perpetuals product and opened a waitlist for priority access but had not launched as of mid-2026.
How much leverage is available on US perpetual futures?
On Kalshi's BTCPERP, leverage up to 50x is available. Altcoin perpetuals typically have lower leverage caps given their higher volatility. The available leverage for each contract is shown on the order entry screen before you confirm any trade.
Do I need to own the underlying crypto to trade perpetuals?
No. Perpetual futures are cash-settled derivatives. You never hold the underlying asset. Your margin and any profits or losses are denominated in dollars on Kalshi. You are taking a leveraged position on the price of the asset, not buying or selling it.
How are perpetual futures different from prediction market event contracts?
Event contracts are binary Yes/No questions with a defined maximum loss (what you paid), no leverage, no expiration date risk, and no ongoing funding cost. Perpetuals are leveraged, have no expiration date, carry an eight-hour funding rate, and can be liquidated if the market moves against you. Both are available on Kalshi, but they are fundamentally different products suited to different purposes.
