Coinbase Acquires Futures Exchange FairX
Coinbase Acquires Futures Exchange FairX

On January 12th, 2022, Coinbase announced the acquisition of FairX, a
Commodities Futures Trading Commission (CFTC) registered Designated
Contract Market (DCM) offering futures. Architect Partners served as the
financial advisor for FairX.

FairX operates a regulated futures exchange for retail investors. The
company offers 1) straightforward and retail user-friendly products 2)
discounted fees compared to a traditional futures exchange, 3) retailfocused products requiring less capital, and 4) committed market makers
enabling strong liquidity. FairX launched in June 2021 and currently offers
futures on two index products in two sizes: the Bloomberg US Large Cap
Index Futures and SuperTech Index Futures, as well as Micro Crude Oil
Since launch, FairX had an average daily volume across its products of about
9,000 contracts. Based in Chicago, FairX was founded in 2019 by Neal Brady,
CEO and co-founder of ErisX, acquired by CBOE (M&A Alert) last year,
Harsha Bhat, CTO and previous SVP/CTO of State Street’s GlobalLink trading
platforms, and Chairman Clifford Lewis. FairX raised over $27 million in three
funding rounds. Notable investors include Hyde Park Venture Partners, TD
Ameritrade, XTX Ventures, Battery Ventures, Limerick Hill, and Virtu

We are seeing a trend of crypto-native firms acquiring regulated entities to
expand their offerings of sophisticated financial products. Both retail and
institutional clients demand regulatorily compliant solutions, but current
regulation is often disjointed as crypto can be an awkward fit for existing
regulatory structures. There has been much discussion regarding a
straightforward set of rules for crypto, most likely tweaks to existing
frameworks. Buying regulated entities therefore provides regulatory
“insurance” for crypto firms while future regulations are being
implemented. Coinbase has done this in the past, via purchases of three
SEC-licensed firms. FTX’s October 2021 acquisition of LedgerX is another
example, absorbing LedgerX’s 3 CFTC licenses of DCM, Swap Execution
Facility, and Derivatives Clearing Organization. We expect this approach to
accelerate in the next twelve months as crypto-native firms continue to
integrate with traditional financial services.

There are several drivers for this acquisition. First, FairX provides Coinbase
with a crypto derivatives regulatory framework for both retail and
institutional investors in the US. FairX is a CFTC registered DCM, and will be
Coinbase’s first entity fully regulated by CFTC (Coinbase applied for an
Futures Commission Merchant license in September of 2021, but has not yet
been approved). Second, it allows simplified access to futures to their
sizable retail client base. Lastly, it furthers Coinbase’s institutional product
line. Institutions need to hedge positions and hedging Bitcoin or Ethereum
is done under the commodity framework in the US.

Crypto Quarterly Snapshots

Q3 2023 Crypto M&A and Financing Report

Dan Wang
October 5, 2023

Download the full report above.

Crypto Mergers & Acquisitions


Crypto dealmakers must have taken the summer off as M&A deals declined again


M&A deals involving crypto companies were down 48% from 50 deals in Q3 ‘22 to 26 in Q3 ‘23, with only 112 total so far for the year.


Announced deal value was also down to $110M, although only 4 deals disclosed their value, meaning they were quite small.


The value would have been much higher, except for the cancellations of two custody deals: Bitgo/Prime Trust and Ripple/Fortress.


Q4 will have to be huge to equal the record pace of 2022 (204 deals).


To see an increase in crypto M&A activity we need to see increased real-world adoption, more regulatory certainty (particularly in the USA), greater institutional investment leading to higher prices/greater M&A currency, and new digital asset developments.  

Crypto Private Financings


Q3 was a tough time for crypto financings


Deal count was down 6% (288) from Q3 (306) and capital raised was down 28% ($1.7B) in the same period ($2.36B) for a low point for the year.


Biggest impact this quarter was on large raises, which were few & far between.  Late stage financing amounts were down 59%, lower than any other series. We do know of several firms that tried but did not find the amounts or valuations desired.


In a larger context, crypto financings lagged both the overall tech and fintech sectors by several digits.


We are often asked if Q4 will improve. The sentiment from our network is that it will, but  muted vs. previous euphoric days.  In other words, a slow but not frozen market, where the muck is getting easier to slog through.

Crypto Public Companies


Public crypto is down with broader markets, but sector revenue growth remains solid  


Our public crypto market index is down 7% for the quarter, compared to approx. -3.6% Q3 moves by both S&P and NASDAQ.  

Network Operators again posted the largest move,  down 23% during a quarter that saw BTC drop 12% and energy pricing spike with Oil climbing 28.5% to 90.79/barrel (WTC).

Crypto-influenced lost 13%, while investment platforms gained a modest 5% for the quarter.


Revenue growth remained solid however, up an average of 93% for the year so far (largely led by the crypto mining group) which suggests that the public crypto sector is beginning to move in line with broader markets rather than sector fundamentals.  


Such amplified correlation may reflect an emerging theme – collaborative inroads with traditional institutions – which will eventually blur the lines between crypto and traditional finance.