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 November 13 – November 19

Eric F. Risley
November 19, 2023

Call us curious.


Not often does a venture capital firm acquire a large controlling ownership position in a young business and even more unusual, doing so by acquiring a founders stake.  This week Foresight Ventures did just that, acquiring 80% of the The Block from its founder for $60M, according to Bloomberg reporting.  This values the entire business at $75M. To make this even more fascinating, according to Pitchbook, Foresight manages a $400M fund which suggests this single investment represents 15% of their entire fund, an extraordinarily large concentration for a venture capital firm, particularly given that almost none of the funds are actually being used to create future value at The Block, rather solely benefiting the founder who has departed.


Historically, The Block has been a well-regarded crypto news and data publisher.  Unfortunately, they found themselves implicated in controversy but the team persevered and has continued to deliver insightful and needed news, information, data and data analytics to the industry.  At the core, at least today, they are a media company with a strategy to build a resilient and high-value data and data analytics subscription business to complement the challenging aspects of being in the media business.  Certainly a reasonable strategy and similar to what Bloomberg has done, albeit Bloomberg did it in the reverse order and they waited 30 years and built a world-class brand and overall business before they started their media division.


The Block competitors include Coindesk, Cointelegraph, Decrypt, Blockworks, Messari and many others of smaller scale.  Being primarily a media business, readership matters.  So how do they stack up?  According to Similarweb, The Block attracted 2.2M visits from both mobile and desktop over the past 30 days.  That compares to 6.9M for Coindesk, 8.2M for Cointelegraph, 2.8M for Decrypt, 1.3M for Blockworks and 432K for Messari.  For additional context, some of the major exchanges dwarf these sites with Binance attracting 50M visits, Coinbase attracting 28M and Kraken attracting 5.8M.  Lastly, Coindesk, a DCG subsidiary, was, according to multiple news sources, to be acquired for $125M earlier this year.  The close of that transaction has not yet been confirmed.