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.


Weeks of November 13 – November 26

Elliot Chun
November 29, 2023

22 Crypto Private Financings Raised ~$130M (Week of November 20)

29 Crypto Private Financings Raised ~$465M  (Week of November 13)

Rolling 3-Month-Average: $156M

Rolling 52-Week Average: $176M


Is this a signal that the crypto private financing market is turning the corner?


$465M is the most amount of weekly capital raised since Dec 12, 2022.


The three largest raises came from well-known, “OG” companies who learned from this last market cycle and are evolving their businesses into this next phase., founded in 2011, is one of the originals and is refocusing on their core retail exchange business. As a sign of this refocus, just announced a partnership with SoFi to transition SoFi’s crypto customers to


Fnality, founded in 2015 as Utility Settlement Coin, is one of the surviving consortiums and gearing up for its Sterling Fnality Payment System launch, which seeks to provide a global liquidity management network for wholesale payments and tokenized RWA. The participants in this network are impressive, featuring Goldman, BNP, DTCC, Euroclear and WisdomTree as investors, joining Santander, BNY, Barclays, CIBC, Commerzbank, ING, Lloyds, Nasdaq, State Street, SMBC, and UBS.


OSL, founded in 2018, is one of the two licensed exchanges in Hong Kong and is focusing its growth efforts in the region following investment from BGX, which is connected to Foresight Ventures that recently acquired The Block.


As our industry transitions from what I call The Great Purge to this next to-be-named phase, we expect many of the surviving “OG” companies to raise significant rounds and refocus their efforts on what got them to this point, secure their financial health by achieving sustainable profitability, and selectively assess expansion opportunities.