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 M&A Snapshot

Week of August 14 – August 20

Peter B. Stoneberg
August 20, 2023

Securitize, a provider of tokenized alternative assets, has acquired Onramp Invest, a digital asset wealth platform. The acquisition will give RIAs (registered investment advisors) access to a wider range of alternative assets, including private equity, private credit, real estate and sales of private stock. The platform also offers access to a variety of educational resources, market research, and tools to help RIAs make informed investment decisions.


Tokenization is essentially a financial infrastructure play, and this deal suggests that the long-anticipated wave may finally be on the horizon. Different players in the sector have focused on different asset classes, but all have struggled to some degree to connect with investor appetite. Matching Securitize’s recent headway tokenizing private funds with the distribution capability of Onramp’s RIA network makes a lot of sense. The deal structure is also sensible, as the two companies started collaboration earlier this year, found it to be successful and consummated the full acquisition. Their collective success could bring validation and momentum to the tokenization space as a whole.


GSTechnologies Limited has acquired PAYPT Finance Ltd, a Canadian company holding a Canadian Money Services Business (MSB) license. The acquisition will allow GSTechnologies to provide a financial service hub to all of its B2B customers.


PAYPT’s MSB license encompasses a range of financial activities, including foreign exchange dealing, cryptoasset trading, money transfer services, and the issuance of debit cards and IBANs. The acquisition is aligned with GSTechnologies’ strategy to expand its B2B Neobank operations beyond the UK.