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.


Q3 2022 Crypto Quarterly Snapshot

Steve Payne
March 22, 2023

17 financings raised ~$54M


Last week was one of the quietest since Architect started reporting on weekly private financings in the crypto space.  Perhaps this is not surprising, given the turmoil in tech banking and crypto banking.  But remember that these deals originated months ago, as announcements typically lag investment, so we’re likely to see the banking mess affect the next few months.  


Stepping back, we looked at our report from six months ago.  For the snapshot dated September 21, 2022, some 40 financings raised $661M – over 10x compared to last week.  That long-ago week had four deals in investing/trading infrastructure – this week has only one.  Not shocking with BTC dipping below $20,000 and exchange volumes down by 70-80 percent.  And the September 2022 week led with LootMogul raising $200M – compared to the largest round last week at $15M.


It’s not just the crypto sector – in the broader tech sector, many of the crossover investors that bid up late-stage valuations last year have gone quiet.  And Series A raises are back in the $2.5M-$10M range of a few years ago.  What’s to like about this?  We are heartened that early-stage is still relatively active, even though valuations are down.  This shows that builders are still building.


We are also heartened at where the investment is going.  One week does not establish truth, but the ten deals shown to the right reflect a (healthy) shift towards developer tools and the other functions required to build and deploy applications.  Entrepreneurs and investors appear to be looking beyond the early, more speculative use cases.


Looking at the Game category, Jungle of Brazil has raised $6 million for its Web3 mobile shooter.  “We are committed to creating fun-first hybrid games that are mobile-first and blockchain-enabled,” said Jungle CEO Joao Beraldo.  Architect is at the Game Developer Conference 2023 in San Francisco this week, and this is not the kind of headline we saw a year ago.  In private conversations with developers a year ago, the gaming community was unhappy with the hype garnered by early play-to-earn models like Axie Infinity, and hoping to see more games take Beraldo’s “fun-first” approach.  We are looking forward to seeing new product launches this week, and will likely have new financings to report for game companies next week.


Finally, a quick quiz for our loyal readers.  We have been calling this weekly report the Crypto Private Financings Snapshot.  In 2023, does this still hold?  Do you prefer crypto, digital assets, blockchain, or another label entirely?  Please send your thoughts to