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 23 – October 29

J. Todd White
November 1, 2023

20 Crypto Private Financings Raised ~$82M

Rolling 3-Month-Average: $123M

Rolling 52-Week Average: $182M


Smaller and earlier-stage venture investments again dominated this week’s private investment landscape, with a slight deal count uptick to 20 financings, but proceeds remaining modest. Infrastructure remains the dominant theme, and the top ten included four trading infrastructure deals, two payment companies, two privacy-related initiatives and a med-tech platform for which privacy is an essential tenet.   


Selected Highlights 

Rymedi, a South Carolina-based med-tech team, closed a $9M Series A co-led by RW3 Ventures and White Star Capital with participation from Blockchange Ventures, Avalanche’s Blizzard Fund, and strategic healthcare industry angels. Rymedi was founded in 2017 with early participation in an FDA-approved consortium to explore blockchain-enabled tracking and verification in drug transport and usage. Other early collaborations included using their global pharmaceutical compliance expertise to help the cannabinoid industry meet international regulatory needs, focused work with the WHO to address hepatitis C in Mongolia, and a recurring symbiotic affiliation with neighboring Clemson University. At the height of COVID, Rymedi was able to quickly deploy its digital workflow platform in testing and treatment initiatives. And immediately prior to their latest round, Rymedi migrated to Avalanche, using three avalanche sub-nets to separately solve for identity (privacy), transaction and compliance monitoring.


Why Notable?   

The Rymedi story has combined deep industry compliance expertise with blockchain technology to solve notoriously tricky and competing mandates in healthcare – the transfer of health records, and automate patient testing, treatment, and monitoring to optimize outcomes with greater speed and reduced cost, while preserving security and privacy of patient data. What has emerged is a nimble and scalable enterprise platform with numerous real-world healthcare applications, from drug tracing and tracking to testing and treatment of infectious diseases, that now serves 1M+ patients in 1200 locations across US, Africa and Australia.


Nocturn Labs, the developer of an Ethereum-based privacy protocol, raised $6M in seed funding led by Bain Capital Crypto and Polychain Capital, with notable support including the Ethereum ecosystem and co-founder Vitalik Buterin, and Bankless Ventures.  The protocol is expected to launch in late November using zero-knowledge proofs and stealth addresses to facilitate private account activity on a public blockchain.  


Why Notable?  

There has been significant recent traction of institutional initiatives using private permissioned blockchains,  particularly within the traditional finance world where privacy, security and control are paramount.  Preserving privacy on public blockchains is oft-cited as a barrier to mass adoption or migration onto public chains, which many feel offers more complete and scalable benefits.  Over time there may be diminishing distinctions as cross-chain solutions and interoperability become more refined over time.  Solving for privacy is a critical component in the evolution.