The Interest Parameter in Perpetual Futures: Shariah Analysis and Empirical Evidence from Centralized and Decentralized Exchanges

Abstract

Purpose — This paper investigates whether perpetual futures can satisfy Islamic prohibitions on riba (interest), gharar (uncertainty), and maysir (speculation) — a question unaddressed by prior literature. Design/methodology/approach — The study develops a four-category taxonomy of perpetual futures by funding-formula structure, collects 39,406 unique funding-rate intervals across four platforms over 365 days (February 2025 – February 2026), and analyses a cross-platform comparison — with a placebo design — between interest-bearing and interest-free DEX protocols. Shariah analysis applies El-Gamal's riba conditions, Kamali's standardisation criterion, and Salamon's maysir test. Findings — The interest parameter in CEX funding formulas is mathematically unnecessary. dYdX v4 operates with I = 0 and produces a funding distribution distinct from CEX platforms (Cohen's d = 0.782 at native cadence, 0.703 cadence-matched; Kolmogorov-Smirnov D = 0.506). Hyperliquid — a DEX using the CEX formula — clusters with CEX. Formula structure rather than exchange architecture governs the riba dimension of the Shariah classification. Originality/value — The first empirically validated framework demonstrating that the riba component of perpetual futures funding is structurally removable, correcting an error of extrapolation in Islamic finance scholarship that treated a single CEX implementation as representative of the entire instrument class. Ownership (qabdh) and delivery-intent are scoped as open questions for cash-settled synthetic perpetuals. Research limitations/implications — The empirical sample covers a single 365-day period; extension to additional time windows would strengthen external validity. Practical implications — The taxonomy provides a screening tool for Shariah boards, fund managers, and exchange designers evaluating Shariah-compliant perpetual futures instruments.