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FTX.US to Buy LedgerX in Bid for US Crypto Derivatives

The move paves the way for Sam Bankman-Fried’s crypto empire to gain a foothold in the restrictive U.S. derivatives scene.

Aug 31, 2021 at 12:00 p.m. UTC
Updated Sep 3, 2021 at 1:47 p.m. UTC

FTX.US is acquiring crypto derivatives firm LedgerX, a move that could pave the way for FTX to offer crypto futures, swaps, puts and calls to U.S. retail traders.

The acquisition, expected to close in October, will see LedgerX become a wholly owned subsidiary of FTX.US, said exchange President Brett Harrison. Once it does, FTX.US will wield a trove of futures market licenses crucial for derivatives trading in the restrictive U.S.

That the U.S. arm of Sam Bankman-Fried’s crypto trading empire would effectively buy its way into the American derivatives scene is hardly a surprise. FTX has amassed a seemingly bottomless war chest – for ad campaigns, stadium rebrandings and even umpire patches – through its highly lucrative global crypto derivatives business.

“There’s a huge amount of interest both in the institutional and the retail side in trading crypto derivatives, and given FTX international’s success in the crypto derivatives market it’s only natural that we would eventually want to enter that market here in the U.S. as well,” Harrison said.

Entering that market is easier said than done, however. FTX.US sidestepped what would have likely been a years-long regulatory slog by snapping up a company that already made it through.

Buying LedgerX “just makes it that much faster for us to enter the market than if we were to go about this completely alone,” Harrison said.

Harrison declined to say how much FTX.US paid in the deal.

LedgerX license lineup

LedgerX has three key licenses allowing it to offer crypto derivatives products: a designated contract market (DCM) license, a derivatives clearing organization (DCO) license and a swap execution facility (SEF) license. The SEF regulates LedgerX’s exchange platform and the DCO authorizes the company’s clearinghouse.

The DCM, which was granted by the Commodity Futures Trading Commission (CFTC) in 2019, allows for the company to offer and settle futures.

Still, any FTX.US crypto derivatives offering will pale in comparison to the parent company’s scope because the CFTC only allows bitcoin and ether contracts.

LedgerX’s leadership, staff and board structure will remain the same post-acquisition, but the name will eventually change as the services become intertwined, Harrison said. He compared it to crypto spot market Blockfolio’s rebranding to FTX.

“The goal would be eventually from your FTX app, in addition to being able to buy spot ETH, to be able to offer ETH futures, or ETH call or put options.”

LedgerX launched in 2013, offering a variety of derivatives around bitcoin. An attempt at launching physically settled bitcoin futures in 2019 was shot down by the CFTC, and two of the company’s founders – Paul and Juthica Chou – were ousted from the firm later that year.

Dexter took over as CEO, returning to the company after a brief stint at Mirror.

DISCLOSURE

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Danny is a business reporter at CoinDesk.

Nikhilesh De is CoinDesk's managing editor for global policy and regulation. He owns marginal amounts of bitcoin and ether.

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