What Are Perpetual Futures? Funding vs the ES Basis, Priced

A perpetual future (a futures contract with no expiry date) stays tied to its index through funding, a payment between longs and shorts, and on Kalshi's US500, the stock-index perpetual the CFTC deemed approved on October 2, 2026, that payment happens once a day at 4:00 p.m. ET. For an ES trader the key qualification is that funding is not a new cost: in equilibrium it is the same financing-minus-dividends carry already inside the ES price, paid in daily instalments instead of through convergence at expiry.

Key takeaway

On a stock index, funding in equilibrium is the ES basis paid a day at a time. With illustrative October 2026 inputs (SOFR 3.94%, dividend yield 1.05%), 30 days of carry on one ES worth $387,199 costs $932.50, and a perp paying one transfer per business day costs the same when funding averages 0.01147% per transfer. Kalshi's US500, deemed approved by the CFTC on October 2, 2026, charges only contracts held at 4:00 p.m. ET.

What is a perpetual future, and how is it different from ES?

A perpetual future is a cash-settled future that never expires, so it needs a funding payment to stay near its index; a dated future like ES gets there by converging to the index at expiry. Margin and daily settlement otherwise work as on any futures contract.

CFTC staff, in footnote 8 of CFTC Letter No. 26-29 (October 3, 2026), define perpetuals as "derivative contracts that have no fixed expiration date, and which rely on a periodic funding rate mechanism" to keep parity with spot. He, Manela, Ross and von Wachter write in Fundamentals of Perpetual Futures: "Unlike fixed-maturity futures, perpetuals are not guaranteed to converge to the spot price."

ES trades at a premium to the S&P 500 (the basis) that shrinks to zero by final settlement on the third Friday of the contract month; the basis you already pay on ES has the formula, and what happens at ES expiry covers the last day. Picture two lines across one 90-day quarter at the illustrative 2.89% a year net carry worked out below. The ES line starts 55.95 points ($2,797.51 per contract) above the index and slides to zero at expiry. The perpetual line has no end: it hovers near the index, nudged back by a transfer at 4:00 p.m. ET each business day.

A dated future pays off its carry by converging at expiry; a perpetual has no expiry, so it collects the same carry through a small transfer every business day.

The idea predates crypto. Robert Shiller proposed perpetual futures in a 1993 Journal of Finance paper; crypto exchanges, BitMEX among them, adopted them widely from 2016, according to Chainalysis. CFTC staff add that the market "largely developed outside of the United States", and the often repeated claim that about 93% of crypto derivatives volume is perpetuals traces to no primary source we could find.

How does the funding rate work?

When the perp trades above its index, longs pay shorts; when it trades below, shorts pay longs. The exchange sets the rate from the size of that gap and moves the cash between holders at fixed times, and only positions open at a funding time pay or receive.

On Kalshi's US500, per its US500 filing at the CFTC of August 18, 2026, "The Periodic Transfer Time is 4:00 P.M. Eastern Time on each Index Business Day", or the early close on a half day. The rate is the average of per-minute premiums (perp one-minute VWAP minus the index, over the index) during regular US equity hours, with no interest-rate component. Each contract held at that time pays or receives rate x settlement price x $1, a daily cash flow much like CME's daily settlement reset.

Two guard rails apply. Below 0.002% the rate is set to zero (the deadband), which over 252 business days is 0.504% a year, well under the 2.89% illustrative carry, so a normal carry premium survives. Above 2.00% the rate is capped (the clamp), which on $387,199 is $7,743.98 for a single transfer.

Coinbase Derivatives calculates funding hourly from twenty 3-minute samples of futures minus spot, scaled down by 24 and smoothed 75% on the current hour, 25% on the previous. Its Tech100 certification states that "Funding payments will be calculated every hour by the Exchange's Clearing House", with the cash moved at the mid-day and end-of-day margin runs. Crypto venues differ again: Binance's funding rate page, updated March 6, 2026, pays by default at 00:00, 08:00 and 16:00 UTC.

Funding moves money from one side of the market to the other; the venues differ only in how often the cash moves.

Myth: funding is a fee the exchange charges. False. In both US filings the money runs from one side of the market to the other. Coinbase's formula is rate x position x multiplier x mark price x -1, so a positive rate debits the long and credits the short.

Where does the 10.95% a year funding figure come from?

It is a crypto-exchange default, not a market price: Binance's default funding formula includes an interest component of 0.01% per 8-hour interval, and 0.01% x 3 payments a day x 365 days is 10.95% a year. It does not carry over to stock-index perps, because Kalshi's US500 formula has no interest component at all.

So calling 10.95% the neutral rate for any perp is only partly true. On a stock index the neutral level is the net carry, 2.89% a year at the illustrative inputs below. In dollars, 0.01% per 8 hours over 30 days is 90 payments, and 90 x 0.01% x $387,199 is $3,484.79, which is 3.74 times the $932.50 ES carry on the same exposure.

Is the funding rate the same as the ES basis?

In equilibrium, yes: funding on a stock-index perp should equal the financing rate minus the dividend yield, which is exactly what the ES basis prices. Kalshi's own filing, an exchange's analysis rather than a CFTC finding, says "the funding mechanism is accordingly the perpetual analog of the cost-of-carry basis embedded in a dated equity index future".

The logic is the arbitrage behind ES fair value. Owning the index costs financing and pays dividends; owning a future keeps your cash earning interest but forgoes the dividends. A dated future charges the difference as a premium that decays to zero by expiry. A perp cannot, so the same filing says "its equilibrium funding is not zero but reflects the net cost of carrying that position".

Equilibrium is not a guarantee, which settles a second myth: a perp does not always trade at its index. Kalshi's rate is the premium the perp traded at, so persistent buying can hold funding above carry, and CFTC staff note that Coinbase's perpetual-style pricing "may deviate due to various factors". If the dividend yield ever exceeds the financing rate, carry turns negative and shorts pay longs.

What does holding a perpetual for 30 days cost compared with ES?

It depends on the funding the perp pays: at the illustrative inputs here, 30 days of ES carry costs $932.50 on $387,199 of exposure, and a perp costs the same when its funding averages about 0.0115% per business-day transfer. Below that it is cheaper to hold than ES, above it dearer.

The inputs: one ES at the S&P 500's October 28, 2026 close of 7,743.98, per FRED's S&P 500 series, is 7,743.98 x $50 = $387,199. For carry we use SOFR of 3.94% on October 28 from FRED's SOFR series less the 1.05% trailing dividend yield from multpl.com, so net carry is 2.89% a year. Both are illustrative proxies; the market prices ES off a term rate and projected dividends.

The table prices that exposure in a perp at three illustrative funding rates and three transfer counts, against the ES carry.

Funding per transfer (illustrative)	19 transfers (Oct 31 to Nov 29, 2026)	21 transfers (typical 30 days)	30 transfers (every calendar day)
0.005%	$367.84	$406.56	$580.80
0.01%	$735.68	$813.12	$1,161.60
0.03%	$2,207.03	$2,439.35	$3,484.79
ES carry, same exposure	$932.50	$932.50	$932.50
Break-even funding rate	0.01268%	0.01147%	0.00803%

Computed by Phoenix Technologies; method: perp cost = $387,199 x rate x transfers; ES carry = $387,199 x 2.89% x 30/360; break-even = ES carry / ($387,199 x transfers). No public US500 funding history exists, so the rates are illustrative.

Judge a stock-index perp by its average funding per transfer against annual net carry divided by 252, here 0.01147%, since 30/360 spread over 21 transfers is exactly 1/252. Crypto examples assume a payment every calendar day, but Kalshi pays nothing on weekends and holidays, so its break-even per transfer is 30/21, about 1.43 times, the calendar-daily figure.

At carry-like rates a stock-index perp costs about what ES carry costs; crypto rules of thumb price it at 3.74 times as much.

Worked example: a 30-day hold through Thanksgiving

Open after the 4:00 p.m. ET transfer on Friday October 30, 2026 and close before the transfer on Monday November 30, 2026.

Exposure: 7,743.98 x $50 = $387,199.
ES carry: $387,199 x 2.89% x 30/360 = $932.50, or $31.08 a day.
Transfers: the window holds 20 weekdays, November 2 to 27. NYSE's 2026 calendar closes Thursday November 26 for Thanksgiving, leaving 19; on Friday November 27 the transfer comes at the 1:00 p.m. ET early close.
Funding at 0.01% per transfer: $387,199 x 0.01% x 19 = $735.68.
Break-even: $932.50 / ($387,199 x 19) = 0.01268% per transfer.

A steady 0.01% would cost about $197 less than ES carry here. On Kalshi, matching the exposure takes many contracts, each $1 x the MerQube index level, with fractions down to 1/10,000 of a contract; the dollar arithmetic is unchanged.

Now plot cost against the funding rate. Three straight lines rise from zero, for 19, 21 and 30 transfers, and a flat line marks the $932.50 ES carry. They cross it at 0.01268%, 0.01147% and 0.00803%: the fewer transfers in the month, the higher the rate a perp can charge per transfer before it costs more than ES.

The fewer funding transfers in a month, the higher the per-transfer rate a perp can charge before it costs more than holding ES.

Myth: a perpetual has no carrying cost because it never rolls. False. Kalshi's filing says dated E-minis "must be rolled every calendar quarter, incurring roll cost, roll-date basis risk, and the operational burden of managing the front-month-to-back-month transition". A perp removes those, not the carry, which arrives as funding instead. How the quarterly ES roll works covers the mechanics; roll commissions and spread depend on your broker, so we do not price them.

Are perpetual futures legal in the US?

Yes. As of October 2026, the CFTC has approved perpetual futures for listing on US-regulated exchanges: Kalshi's bitcoin perp was approved by CFTC order on May 29, 2026, and its US500 stock-index perp was deemed approved on October 2, 2026. The belief that perps are offshore-only is out of date.

The sequence, from Letter 26-29, the CFTC order approving BTCPERP and Coinbase's request letter to CFTC staff:

July 21, 2025: Coinbase Derivatives' first perpetual-style futures begin trading.
May 29, 2026: the CFTC finds that listing perps on bitcoin and other digital commodities with deep, active and continuous spot trading as futures does not violate the Commodity Exchange Act, approving Kalshi's BTCPERP, which trades 24 hours a day, 7 days a week.
June 3, 2026: a CFTC policy statement, published in the Federal Register, requires perps on assets the order does not cover to undergo review and approval "pursuant to Commission Regulation 40.3."
August 18, 2026: Kalshi files US500; it is deemed approved on October 2, 2026.
October 1 and 3, 2026: Coinbase Derivatives asks staff for no-action relief to remove the expiry dates from its index perpetual-style futures, and staff issue Letter 26-29.

That relief is over: "The no-action positions in this letter expire on October 20, 2026." It covered any exchange converting broad-based security index contracts, under eight conditions including at least 5 calendar days' notice and a chance to close positions. A Coinbase conversion was reported for October 26, 2026, but we found no primary filing, so check Coinbase Derivatives' own notices.

How do Kalshi US500 and Coinbase index perps compare with ES?

All three are CFTC-regulated futures on a US equity index, but only Kalshi's US500 is a true perpetual by its terms; Coinbase's index contracts were listed with long stated expiries, and ES expires every quarter. They also track three different indices.

Myth: Coinbase's US perps launched as true perpetuals. False. CFTC staff wrote that "these perpetual-style futures had long-dated expiration dates, including up to 25 years." The Tech100 contract was filed as a 5-year future, the first expiring in December 2030, and Coinbase told the CFTC that "In CDE's experience, perpetual-style futures contracts are typically held for short durations."

Myth: Kalshi's US500 tracks the S&P 500. False. Its filing names "the MerQube US Large Cap Index", a price-return index of the 500 largest companies listed and domiciled in the United States. We found no public data on how closely it tracks the S&P 500.

The table sets the terms side by side, as filed or published in October 2026.

Term	CME ES	Kalshi US500	Coinbase index perp-style (Tech100 filing)
Expiry	Quarterly (March cycle), third Friday	None	Stated 5-year expiry; removal requested October 1, 2026
How carry is paid	Inside the basis, which converges at expiry	Funding once per index business day at 4:00 p.m. ET	Funding calculated hourly, settled at mid-day and end-of-day margin runs
Index	S&P 500	MerQube US Large Cap (price-return)	A MarketVector index
Multiplier	$50 per point	$1 per point	$1 x index
Hours	4:00 to 5:00 p.m. CT break, Monday to Thursday	Sunday 6:00 p.m. to Friday 5:00 p.m. ET, no daily halt	Sunday 7:00 p.m. CT to Friday 4:00 p.m. CT
Clearing	CME	Kalshi Klear	Nodal Clear

Sources: CME Group contract terms and the Kalshi and Coinbase filings at the CFTC; check each exchange's current terms before trading. Both index perps close at the weekend like ES, unlike Kalshi's 24/7 bitcoin perp (see which futures trade on weekends).

Leverage is missing on purpose. Kalshi's filing sets margin by a "risk-based margin methodology" with no number, and we could not verify a leverage figure from either venue; initial and maintenance margin explains how margin sets leverage.

Picture the comparison as a three-column matrix in which most cells look alike: CFTC regulation, cash settlement, a US equity index. One row lights up, carry. ES collects it through the basis at expiry, Kalshi through one 4:00 p.m. ET transfer a day, Coinbase through hourly accrual settled twice a day.

Regulation, settlement and index type look alike across all three; what differs is how each one collects the carry.

Does a perpetual change anything for an ES or MES day trader?

Not for a trader who is flat before 4:00 p.m. ET: Kalshi's US500 charges funding only on contracts held at the transfer time, and a day trade never holds one then. Even on ES, the carry inside a two-hour trade on $387,199 is $2.59, under the $12.50 value of one ES tick.

The myth that day traders pay funding on every perp trade is partly true at most. Kalshi and Binance charge only positions open at the funding time. Coinbase's filing does not say at which instant within each hour it measures the open position, so whether an intraday Coinbase trade accrues funding cannot be answered from public documents; ask the exchange.

A perp differs for holders. It removes the quarterly roll and the price jump that back-adjusted continuous charts exist to hide. Kalshi itself calls dated and perpetual contracts "complementary rather than substitutes", since the ES curve carries term-structure information a single perp cannot. Against the perp: no realised US500 funding history, volume or open interest has been published that we could check.

If an ES-sized position is too large, MES at $5 a point is $38,719.90 of exposure at the same level; the micro contracts compared covers the smaller sizes. Traders arriving from CFDs can set a perp's daily transfer beside their CFD financing; how CFDs differ from futures covers the rest.

Your decision rule:

If you are flat before 4:00 p.m. ET every session, funding never applies to you; choose between ES, MES and a perp on liquidity, index, platform and fees, not carry.
If you hold for days or weeks, compare the perp's average funding per transfer with annual net carry divided by 252, about 0.0115% at October 2026 inputs. Above it, the perp costs more than ES carry; below it, less.
If your hold spans a holiday week, count transfers, not days: 19 in the 30 days to November 29, 2026, which lifts the break-even to 0.01268%.
If your hedge or benchmark is the S&P 500 itself, stay with ES; US500 tracks a different index.
If a venue quotes funding in crypto terms, 0.01% per 8 hours, do not assume it fits a stock-index perp: over 30 days that is 3.74 times the ES carry.

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Frequently asked questions

Do perpetual futures ever expire?

A true perpetual never expires: Kalshi's US500 terms state that it has no expiration date. Some contracts marketed as perpetual-style do carry a date, such as Coinbase's index contracts, listed with expiries of up to 25 years. Read the contract terms rather than the product name.

Can the funding rate on a stock-index perp be negative?

Yes. A negative rate means the perp traded below its index on average, and then shorts pay longs. On an equity index that is the expected sign when the dividend yield exceeds the financing rate, the same condition that puts ES below the cash index.

Is funding charged on weekends on Kalshi's US500?

No. Kalshi's filing says no transfer, funding rate or settlement price is determined on a day that is not an Index Business Day, so Saturdays, Sundays and exchange holidays carry none. That is why its break-even rate per transfer sits above the calendar-daily figure used in crypto examples.

What happens to perp funding on a half-day session?

The transfer moves to the early close. Kalshi's terms set it at the scheduled early close of regular trading on days the primary US exchanges close early, which on Friday November 27, 2026 is 1:00 p.m. ET per NYSE's calendar. A position closed before then pays nothing for that day.

How big is one Kalshi US500 contract compared with ES?

Far smaller. Each US500 contract is $1 times the MerQube US Large Cap Index level, against $50 a point on ES and $5 a point on MES, and Kalshi allows fractions down to 1/10,000 of a contract. Matching one ES position takes many US500 contracts, but the funding arithmetic per dollar of exposure is unchanged.

Does Kalshi's US500 trade 24/7 like a bitcoin perp?

No. US500 trades from Sunday 6:00 p.m. ET to Friday 5:00 p.m. ET and is closed at the weekend, while Kalshi's BTCPERP trades 24 hours a day, 7 days a week. Unlike ES, US500 has no daily maintenance halt.

Is the Coinbase US500 a true perpetual now?

We could not confirm it. Coinbase Derivatives asked the CFTC on October 1, 2026 to remove the expiry dates, staff relief under Letter 26-29 ran until October 20, 2026, and a conversion was reported for October 26, 2026 without a primary filing we could find. Coinbase Derivatives' own notices are the place to check.

Can you trade perpetual futures at a futures prop firm?

That depends on the firm, and this article did not research which firms list perpetuals. Where a firm does, its rules on holding past the close decide whether funding ever reaches you, since Kalshi charges only contracts held at 4:00 p.m. ET. Read the firm's current product and rule pages before buying anything.