Oil Perpetuals and the Regulatory Risk to Commodity Markets

The regulatory fight over perpetual futures contracts on oil and other commodities has escalated into a risk event for the incumbent exchange operators and the broader commodity trading infrastructure. In mid-May, Intercontinental Exchange and CME Group petitioned the Commodity Futures Trading Commission to require Hyperliquid, a three-year-old decentralized exchange, to register under U.S. rules. A month later, the CME sued the CFTC over its May 29 approval of Kalshi's application to list a bitcoin perpetual as a futures contract. The CME argued that a perpetual future is not a futures contract under the Commodity Exchange Act because it has no expiration date or delivery obligation; it is a swap, the CME said. The CFTC currently has only a single commissioner, which the CME cited as a procedural defect.

Horizon Kinetics, in its second-quarter 2026 commentary, described the regulatory dimension as a potential threat to the regulated exchanges. The fund manager noted that Hyperliquid had expanded from cryptocurrencies into oil token contracts earlier this year. When the U.S.-Iran conflict drove Brent crude from $71.32 to $126.69 between February and March, trading volumes in oil tokens on Hyperliquid rose to billions of dollars in a single day. That surge caught the attention of the established exchanges.

Perpetual futures have no expiry date and no delivery of the underlying physical asset. Horizon Kinetics argued that they cannot be used to hedge a real-world commercial exposure, such as a tanker of oil in transit. A South Korean distributor holding $40 million of crude for three weeks needs a futures contract with a specific delivery date, not a perpetual wager. The firm said that 85% to 90% of ICE's business is institutional, and that perpetuals are a retail instrument. Kalshi offers roughly 6x leverage on its bitcoin perpetual: a $200 deposit controls $1,000 of bitcoin. A 10% rise in bitcoin yields a 50% return; a 20% drop wipes out the collateral.

Horizon Kinetics does not see perpetuals as an existential threat to the exchanges. ICE owns 17% of Polymarket, which it bought for $1 billion in late 2025 and added another $600 million in March. The exchange is interested in the data from prediction markets, not the sports wagering. Information and connectivity services are ICE's second-largest revenue source after derivatives trading. The fund manager also pointed out that every major U.S. regulated exchange has tokenization initiatives under way, coordinated with institutional brokers and regulators.

The share prices of the major exchange operators fell between 22% and 38% from May 15 through June 22, then recovered about 20%. ICE and CBOE are higher than a year ago; two others are lower. Horizon Kinetics noted that ICE's first-quarter revenues and operating margins were up, and its full-year 2025 per-share earnings rose 14%, in line with its 20-year annualized growth rate of 15%. The firm said valuations for ICE and CME have not been this low since the 2008 financial crisis.

Beyond the regulatory skirmish, Horizon Kinetics described a broader shift in commodity supply and demand. After a decade of oversupply, the balance is tightening across oil, natural gas, iron ore, copper, and electrification metals such as cobalt and lithium. The fund manager said that raw material price increases can degrade profit margins throughout the stock market, and that the S&P 500 has almost no direct exposure to this risk. The Inflation Beneficiaries ETF, which Horizon Kinetics runs, has only a 0.57% overlap with the S&P 500 by weight.

Gold was a separate topic. The precious metal hit a high of $5,400 an ounce earlier in 2026 before pulling back to roughly $4,100. Horizon Kinetics reduced its positions in precious-metal royalty companies such as Wheaton Precious Metals and Franco-Nevada. The rationale was that the extreme discount rates that made royalty contracts attractive in 2015 are gone. Those companies now trade at roughly 2x net asset value, using consensus analyst estimates that discount future cash flows at 3% to 5%. Horizon Kinetics said that if the valuation multiple contracts to 1.5x NAV over five years, the annualized return would fall to about 8.6%, even with 15% earnings growth.

LandBridge, which went public in July 2024 with Horizon Kinetics as an anchor investor, offers a different commodity exposure. The company owns 300,000 surface acres in the Delaware Basin of Texas. Its current revenue comes from leasing land for water transportation, treatment, and storage. The hydrogeology of the basin means that as oil wells age, the volume of brackish water brought up with each barrel rises. Horizon Kinetics said the ratio is now four barrels of water per barrel of oil and is expected to reach six to one by 2030, an annualized increase of about 9% without any growth in oil output. The water handling contracts run for 10 years and carry inflation escalators. LandBridge also introduced the concept of "powered land" for private power generation and data center development on its acreage.

On bitcoin, Horizon Kinetics offered a specific price projection. Using the production cost model, the fund manager estimated that at the next halving in April 2028, bitcoin should trade between $150,000 and $250,000. A separate demand-based model using Metcalfe's Law produced a figure of $270,438. The current price is around $90,000, down from its high. Horizon Kinetics said the periodic four-year declines are "right on schedule" and reflect the doubling of production costs at each halving.

The CFTC has not set a timeline for a decision on the Hyperliquid petition. The CME lawsuit is pending. The next halving is scheduled for April 2028.