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 October 16 – October 22

J. Todd White
October 25, 2023

17 Crypto Private Financings Raised ~$91M

Rolling 3-Month-Average: $123M

Rolling 52-Week Average: $182M



This week saw the transaction count remaining steady at 17 for the third week running, although with notably lower proceeds.  DApps dominated the top ten board.



Selected Highlights 



Globacap, a London-based technology firm focused on private capital markets, completed a $21M Series B financing to ramp marketing, sales, and facilitate geographic expansion. According to co-founder Mules Milston, Globacap is “bringing public markets-like infrastructure to private capital markets to improve access, boost liquidity and remove administrative burdens”. Globacap develops SaaS and white-label solutions for financial institutions – including securities exchanges, banks and asset managers. They seek to reduce costs and improve efficiency through digitized workflow automation for the issuance, administration, transfer and settlement of private capital markets transactions.  



Why Notable?   

With AUM at $11.7 trillion for 2023 and 20% annual growth despite largely opaque, manual and laborious transaction and admin processes, private capital markets represent a substantial opportunity for automation and digitization. The latest round from credible institutional investors including Cboe Global Markets and the Johannesburg Stock Exchange, suggests a strong market validation for Globacap’s approach.



SynFutures, announced a $22M raise intended to expand engineering and biz dev functions. Concurrently, the Singapore-based decentralized crypto derivatives platform launched its Oyster automated market maker, and hopes that enhanced efficiency and liquidity through Oyster will help address the gap in decentralized exchange derivatives trading volume, which dwarfs spot trading on centralized exchanges but has lagged in DeFi markets. SynFutures is among the largest markets on the Polygon layer-2, with a modest TVL of $6M.  



Why Notable?  

The round was led by Pantera Capital, with heavyweights Susquehanna International Group and HashKey also joining the round.  It is notable not only for its impressive investor mix, but also as a more traditional financing for a DeFi platform.  While the valuation and structure of this round were not disclosed, CEO Rachel Lin expressed willingness to consider a native token launch down the road, subject to market conditions and the evolving regulatory landscape.



Crypto data firm Coin Metrics raised $6.7M in a private placement from a new undisclosed investor with a mix of equity, options and “other securities” according to their Form D SEC filing. Coin Metrics provides crypto market, network and price data, and boasts a highly credible suite on its existing cap table with an array of both crypto and traditional institutional investors. The new funds will be used to improve financial intelligence, data authentication and analytics.



Why Notable?

Coin Metrics is emerging as a go-to resource for institutional interest in crypto markets, and has repeatedly received broad investor support.  Its 2022 $35m Series C round – led by BNY Mellon and Acrew Capital, with support from Goldman Sachs, Brevan Howard, and Cboe Digital Markets – followed a successful $15M Series B in 2021 included Goldman Sach and Fidelity, and $6M Series A in 2020, led by Highland Capital Partners, with notable Web3 investors Digital Currency Group, Avon Ventures, Raptor Group, Castle Island Ventures, and Coinbase Ventures.  Apparently, this recent smaller private placement was facilitated to bring an undisclosed investor into these impressive ranks.