The emergence of credit derivative CDS made financial markets more active and investors on Wall Street and around the world were more eager to take speculative risks in the market because they had a way to in-sure against credit risk.On the positive side,the existence of CDS has given the market great vitality,accelerated market liquidity and made the market more prosperous.On the negative side,the emergence of CDS makes the pos-sibility of systemic risk sharply triggered by the market increase,and the financial bubble becomes more serious.Therefore,it is of practical significance to understand the legal risks of CDS,a financial derivative,for the healthy development of Chinas financial market.Based on the necessity of strengthening the concept of financial rule of law,this paper discusses how to promote the steady and rapid development of CDS in the Chinese market by focu-sing on the establishment of a centralized legislative model,the construction of a risk pricing mechanism and the raising of the threshold of judicial review.