Wall Street can stop a tokenized share, but can it stop a stock perp?

Costco recently made news when it strongly objected to a blockchain version of its shares. And while the supermarket giant did raise a set of pretty valid concerns regarding the potential risks of tokenization, the problem was that traders can actually already buy a blockchain-based contract (i.e., token) that follows its stock price.

The company is among 67 issuers in OKXICE's Nov. 5 objection notice, blocking third-party tokenized versions of their stock from the proposed venue backed by the New York Stock Exchange's owner.

Meanwhile, Kalshi lists a Costco perpetual, which offers price exposure without giving its buyer any shares.

The two products show how differently finance treats owning a company and trading its price: an issuer can stop its stock tokens from trading through one blockchain arrangement, while contracts tied to that stock follow a separate legal route.

That route is now being challenged in court, with established Wall Street firms competing to offer these contracts.

Owning Costco is a package deal

Shares give shareholders an interest in a business, along with the voting and distribution rights attached to the particular class of stock they own. Putting that interest on a blockchain can change how it's transferred while preserving what its owner is entitled to receive.

OKXICE's proposed model uses a tokenization provider acting through a registered broker-dealer to hold one underlying share for each token. Each token represents an entitlement to that share, and customers would trade them against dollar-linked stablecoins in automated asset pools.

Those pools can produce different prices from conventional exchanges. The ownership claim and the price you can get for it are separate concerns.

The Securities and Exchange Commission's September exemption allows qualifying venues to operate outside ordinary exchange registration, subject to conditions.

Tokens must preserve equivalent shareholder rights, including votes, dividends, and a claim on residual assets if the company is liquidated. Any token that just copies a share price doesn't qualify.

But the underlying company also gets a say. Before offering stock tokenized by an unaffiliated third party, an exchange has to notify the issuer, and each company has 30 days from receiving its notice to object.

The SEC's staff guidance confirms that a timely objection must be disclosed and prevents the venue from offering that token under the exemption.

Costco and dozens of others have already exercised that right, with their objections applying to OKXICE, and the companies haven't collectively explained their motives. The list therefore tells us little about their views on other forms of tokenization or contracts referencing their share prices.

The price has a separate market

A Costco perp works differently. You go long to gain when the stock rises, or short to gain when it falls. The contract has no scheduled expiry, and Kalshi's stock-perps documentation says holders receive neither shares nor voting rights.

That also means you can take substantial exposure with relatively little money. Costco's market page showed maximum leverage of 4.9 times on Nov. 6, meaning $1,000 of collateral supports $4,900 of price exposure.

A 10% move would cost $490 before fees and other adjustments, nearly half the original collateral. If collateral falls below the required minimum, the platform can close the position.

Even though the contract has no expiry, you may lose the ability to wait for a recovery.

Perps also need a way to keep their price near the underlying asset. Conventional futures have an eventual settlement date, while perpetuals use recurring payments between traders, called funding, to discourage a persistent gap.

When the contract trades too high relative to its reference price, longs have to pay shorts, and when it trades too low, payments run the other way.

These funding transfers can reward taking the less popular side, but they also mean that correctly predicting a stock's direction doesn't fully determine your return.

Kalshi says cash dividends generate contractual cash adjustments for long and short positions, although those payments don't make contract holders shareholders, nor does perpetual mean permanently open.

Kalshi's Costco page lists trading from Sunday evening to Friday afternoon, Eastern time. Its documentation warns that customers cannot open or close positions during closures.

On Nov. 3, CFTC Chairman Michael Selig said equity perpetuals could begin trading on eligible exchanges registered with the derivatives regulator and notice-registered with the SEC. He described the products as deemed approved under Regulation 40.3, which permits approval when the review period expires without a notice of non-approval.

The agency treats them as security futures, placing them under a joint regulatory framework. Their lack of an expiry date is at the heart of the challenge to that classification.

Wall Street takes both sides

The Capital Markets Alliance Association, whose court filings include declarations from Cboe and Citadel Securities, wants to stop the approvals. It argues that a contract without future delivery cannot qualify as a security future.

In an October SEC submission, Cboe argued that the contracts fall under security-based swaps, agreements that transfer financial exposure linked to securities under different rules. It also warned that stock-perp trades would escape the securities markets' consolidated surveillance system even when traders hedge them with ordinary shares.

Cboe has a commercial stake in the outcome, but its argument raises a substantive issue about which safeguards should follow a trade that tracks a stock without delivering it.

Judge Valerie Caproni's Nov. 3 order found the challengers likely to succeed in arguing that the CFTC exceeded its authority. She nevertheless denied an emergency restraining order because the alliance hadn't demonstrated the imminent, irreparable harm required for that relief.

The approvals remained undisturbed at that stage, despite the judge's preliminary assessment of the CFTC's legal position. The order set Nov. 6 for the government's opposition to a preliminary injunction and Nov. 10 for the alliance's reply.

Meanwhile, the NYSE's parent is pursuing both markets. ICE announced an investment and agreement with Trade[XYZ] on Oct. 29 to bring its Hyperliquid-based perpetual markets into the US.

The planned regulated venue still requires approvals, including for leveraged trading. ICE expects distribution to include its OKX joint venture, subject to that venture's own approvals.

The same exchange group backing tokenized shares sees an opportunity in selling exposure to their prices. The dispute is partly over which institutions can offer crypto's trading model, and which rules they must follow.

The difference for investors is what each product promises. Qualifying share tokens must preserve shareholder rights while introducing the costs and risks of their trading platform. Perps offer leveraged exposure governed by collateral requirements, funding payments, and contractual adjustments.

Costco's objection shows how an issuer can stop the first product on a particular venue, while the court challenge concerns regulators' authority to approve the second. The ticker may be familiar, but the rights and risks come from the contract you buy.