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 20 – November 26

Eric F. Risley
November 26, 2023

The same but different.


Two weeks and two M&A transactions that echo one another.  This week Bullish announced the acquisition of CoinDesk after last week, an 80% control stake of The Block was sold.  Each is a combination of related but differing businesses, including media, events, data, data analytics and research.  The mix matters.


On the media side of the business, building an audience is job #1.  Revenue is a function of visitors and page views.  As highlighted in last week’s Crypto M&A snapshot, CoinDesk and The Block attracted 6.9M and 2.2M total visits over the past 30 days, respectively, according to Similarweb.  An average visitor views 1.63 pages at Coindesk and 2.02 pages at The Block.  With this data, plus an estimate of advertising units per page and cost to advertise, we can back into revenue from advertising.


Without diving into the details, it’s possible in a perfect scenario, that each page view could generate $.05 – $.10 (a CPM of $50 – $100).  That roughly translates into annual advertising revenue of $6.5M – $13.5M for CoinDesk and $2.5M – $5.0M for The Block.  Setting aside the costs to create the necessary content to attract visitors, these are relatively small businesses when only considering advertising revenue.  This is why most publishers seek additional revenue by hosting events, like Coindesk’s annual Consensus conference, and seek subscription revenue through selling data, data analytics, and research products.


So why did Bullish acquire CoinDesk?  Bullish is building a challenger crypto asset execution platform, oriented toward institutions today.  Building investor visibility is crucial to attract new customers.  Acquiring arguably one of the best-known brands within the crypto assets sector certainly attracts visibility.  Also, with the tone of the crypto asset markets improving, CoinDesk is likely to see improving business fundamentals for the foreseeable future.  It’s also borrowing from the playbook of Binance, who acquired CoinMarketCap in April 2020 which is explained in our M&A Alert from that time.