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 September 4 – 10

Peter B. Stoneberg
September 10, 2023

Last week was a slow week in crypto M&A, but September is starting with a bang with 4 deals already announced in this shortened US holiday week.


Ripple Acquires Fortress Trust to Expand Regulatory Compliance Capabilities Ripple, a leader in enterprise blockchain and crypto infrastructure, has agreed to acquire Fortress Trust, a Nevada-based financial institution that provides licensed Web3 financial, regulatory, and technology infrastructure. The acquisition will help Ripple expand its regulatory compliance capabilities and offer a wider range of Web3 products and services to its customers. Fortress Trust provides regulatory-compliant solutions to the blockchain industry including a Nevada Trust license, which is one of the most stringent regulatory frameworks in the United States. So Ripple now has a NY BitLicense, 30 US Money Transmitter Licenses and a Payment license from Singapore’s central bank. Ripple has a strong regulatory footprint in the USA, but to achieve their stated goal of “becoming the one-stop shop for enterprises looking to convert, store, and move value on blockchain around the world” they may need to acquire another company with global licenses to expand its international reach. Earlier this year Ripple also acquired Metaco, a crypto custody provider in a $250M deal. Terms were not disclosed and the deal is subject to further due diligence and regulatory approvals.


In another payments-related deal, payments company Clear Junction has acquired UK-based cryptoasset firm Altalix for an undisclosed value which is expected to close in Q4 2023. The acquisition will give Clear Junction access to Altalix’s fiat-to-crypto gateway solutions and its FCA registration. Clear Junction said that the acquisition is not an attempt to become an exchange or trade in digital assets, but rather give them a competitive edge by having both a cryptoasset registration and an electronic money institution (EMI) license. This should allow the combined company the ability to provide both fiat and crypto correspondent account services to regulated institutions.


₿trust, a nonprofit organization funded by Jack Dorsey, has acquired Qala, an organization dedicated to training Bitcoin and Lightning Network engineers in Africa. The acquisition will help ₿trust scale up its programs in Africa and drive the development of Bitcoin open-source engineers from across the Global South. Qala has built one of the biggest online communities of Bitcoin developers in Africa, spanning over 42 countries. Qala CEO Femi Longe and program manager Stephanie Titcombe will join ₿trust as program leads at ₿trust Builders.


It was also announced that GMO Media Inc. acquired Blockchain Game Info from PLAYTHINK, Inc.  No further details are available at this time.