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 October 9 – October 15

Eric F. Risley
October 15, 2023

Our team will be at Money2020 in a week.  Please email if you’d like to meet.


Data and data analytics is a crucial segment within crypto.  Data reveals the most fundamental questions like, “what is the price of Bitcoin?” and simply put, informs every crypto asset investment made.  Data’s value extends far beyond price data and includes being the key ingredient for trading markets, reveals the use and trends of blockchains, powers trading risk management and lending risk management, identifies and stops fraud, drives regulatory compliance, identity, accounting, auditing and taxes, informs trading strategies and research, allows an understanding of crypto users, helps improve application use and performance, informs marketing efforts, and the list goes on.  These use cases touch every single crypto asset market participant.


Under this theme, one of the leading data & data analytics companies, TRM Labs, announced the acquisition of  Their product, Chainabuse, is a crowdsourced crypto fraud reporting platform designed to reveal and stop malicious activities impacting crypto participants.  As is often the case, business development relationships often predate an acquisition.  In this case, TRM Labs was an early partner with helping to launch Chainabuse.


TRM Labs raised an impressive $70M growth capital round in late 2022 with top-tier new investors Thoma Bravo, Goldman Sachs, Brevan Howard, Geodesic Capital and CMT Digital.  TRM Labs is focused on identifying fraud, money laundering and financial crimes and peers include Chainalysis and Elliptic among others.  Architect Partners has published a variety of research and insights on the data & data analytics sector, with more coming shortly.