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 July 31 – August 6

Peter B. Stoneberg
August 6, 2023

Ayre Group, a global investment firm, has agreed to acquire nChain, a global blockchain technology company founded in 2015 with 240 employees and is the developer of the Bitcoin SV Node software, Teranode and LiteClient.  The deal could be worth up to $570 million consisting of an equity acquisition of nChain by the Ayre Group, an IP licensing deal for Ayre Ventures portfolio companies, and a line of credit. The acquisition will give Ayre Group a controlling interest in nChain, which holds nearly 800 patents related to blockchain technology and claims that they have over 3000 more patents applied for.  nChain’s IP portfolio covers a wide range of areas, including Web3, non-fungible tokens, and smart contracts. The acquisition is expected to close in the third quarter of 2023.


Yuga Labs, the company behind the Bored Ape Yacht Club (BAYC) NFT collection, has acquired Roar Studios, a company that develops immersive media experiences. The acquisition will help Yuga Labs to further develop its Otherside metaverse, which aims to create a decentralized, user-owned virtual world.  Roar Studios is known for its work on ROAR, a platform that allows artists and fans to connect, collaborate, and compete in an immersive, real-time entertainment world. Yuga Labs CEO Daniel Alegre said that the acquisition of Roar Studios will help accelerate the execution of the company’s vision for Otherside and Yuga’s ecosystem more broadly.  Roar Studios CEO Eric Reid will join Yuga Labs as General Manager of Otherside. The acquisition of Roar Studios shows that Yuga Labs is committed to building a leading metaverse platform, and it brings together two of the most innovative companies in the space. Terms were not disclosed.