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.


Week of May 8 – May 14

Steve Payne
May 17, 2023

23 Crypto Private Financings Raised ~$88M

Last week was another slow period for announced financings in the crypto segment – Architect tracked 23 financings, with $88M in funding disclosed.  At this point, May is shaping up to be the slowest financing month in the past year.


In the largest announced deal, Seoul-based Humanscape raised a $15M Series C round led by prior investors Care Labs, Green Cross Healthcare and others plus new investor Hana Securities, bringing total capital raised to date to about $35M.  Humanscape is a digital health company with offerings including Mami Talk, a parenting and childbirth app expanding to Southeast Asia and Rare Note, a blockchain-based observational research clinical data management solution.  In 2019, Humanscape launched the HUM token, now listed on a handful of DEXs mainly in Korea with a market cap of $100M.  


The second-largest raise was reported by Blockworks, the crypto media firm, with a $12M Series A at a valuation of $135M.  This round was led by 10T, the growth equity “picks and shovels” crypto fund with $1.2B under management and with participation from crypto-focused Framework Ventures and crypto angel investor (and Blockworks content contributor) Santiago Santos.  The company reported that this was their first outside capital raise.  Blockworks reports it will use the funding to accelerate their research and data analytics offerings, providing subscription-based access to research, data and analytics, governance, and real-time news. We are familiar with Blockworks – they have quoted Architect Partners in a handful of recent articles.


The third largest round announced last week was a $10M seed raise by Indian adult entertainment and media platform TABOO for their privacy-centric, censorship-resistant blockchain content platform.  This round was at a supposed $250M valuation, led by an unnamed “ex-JP Morgan senior executive”.