Coinbase Global (COIN) said it received regulatory approval to offer US retail customers regulated crypto futures in the coming months, sending its stock up as much as 5% before the market open on Wednesday.
The country’s largest crypto exchange said it secured the permission from National Futures Association (NFA), a self-regulatory organization designated by the Commodity Futures Trading Commission (CFTC).
The approval comes as Coinbase squares off against the Securities and Exchange Commission in court in the Southern District of New York. The federal securities regulator has alleged that Coinbase is operating as an unregistered securities exchange, broker, and clearing agency.
The case will likely boil down to whether certain crypto assets should be considered securities or commodities in the US. Earlier this month, Coinbase asked a US judge to dismiss the lawsuit, arguing that the cryptocurrencies sold through its exchange are more like baseball cards than investment securities.
Its stock is up 123% year to date, despite the SEC lawsuit, but it has fallen since reporting earnings earlier this month.
Coinbase filed for approval to offer regulated crypto products shortly after its IPO two years ago. In 2022, it acquired CFTC-regulated futures exchange FairX, now rebranded to Coinbase Derivatives Exchange.
The company has since launched trading in bitcoin and ether futures for institutional investors. Earlier this year, it also announced plans to spin out a derivatives platform for non-US citizens.
The new approval from the NFA to offer crypto futures to US investors "is a significant milestone for bringing federal regulatory oversight over the crypto markets," Coinbase’s chief policy officer Faryar Shirzad said in a statement.
Greg Tusar, vice president of institutional product at Coinbase, said in a blog post that Coinbase is the first crypto-only platform to offer regulated crypto futures products and spot crypto trading to US investors.
“Access to a CFTC-regulated crypto derivatives market is essential to unlocking significant growth and enabling broader participation in the cryptoeconomy,” Tusar added.
In the coming months, Coinbase will provide US customers with more information on how they can access the platform’s futures products.
Derivatives products allow investors to use leverage to make investments with less upfront investment than trading spot crypto. Investors can also use futures products to take long or short positions on a cryptocurrency's future performance. The Chicago Mercantile Exchange (CME) already offers bitcoin and ether futures.
Derivatives products also provide an essential way for crypto trading venues to not only attract customers and earn higher revenues but also control a higher share of the industry’s total trading volume.
The global crypto derivatives market represents approximately 75% of crypto trading volume worldwide.
In past years, so-called offshore exchanges such as Binance, the world’s largest crypto exchange, and the now-bankrupt FTX managed to take market share from Coinbase by offering traditional futures as well as more popular perpetual futures and options trading.
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