Kraken Acquires CFTC-Regulated Exchange in $100 Million Deal

Kraken has purchased Small Exchange from IG Group for $100 million, gaining a critical regulatory license to offer derivatives trading directly to U.S. customers.

The deal, announced October 16, marks a major step in Kraken’s push to build a complete trading platform ahead of its planned 2026 public listing.

What the Deal Includes

The transaction combines $32.5 million in cash with $67.5 million in stock from Payward, Kraken’s parent company. Small Exchange holds a Designated Contract Market (DCM) license from the Commodity Futures Trading Commission (CFTC), which allows Kraken to create and list its own derivatives products under federal oversight.

A DCM license lets exchanges offer futures and options contracts while meeting the same regulatory standards as major U.S. exchanges like the Chicago Mercantile Exchange. The CFTC requires DCMs to follow 23 core principles, including preventing market manipulation and maintaining fair trading rules for all participants.

Source: blog.kraken.com

For IG Group, the British trading firm that sold Small Exchange, the deal generated a profit of £73.3 million after taxes. The companies will continue working together through a partnership agreement where IG can distribute products from Kraken’s new derivatives platform.

Building a Global Trading Network

The Small Exchange acquisition completes Kraken’s regulatory puzzle. The company now operates licensed derivatives venues in the United States, United Kingdom, and European Union. This network handles over 450 digital and traditional assets across six major currencies, all connected through one technology platform.

“This step connects spot, futures and margin products inside a single regulated liquidity system,” said Arjun Sethi, Kraken’s co-CEO, in the company announcement. The integrated system reduces delays in moving funds between different types of trades and brings features that were previously only available on offshore exchanges to U.S. traders.

Before this deal, U.S. traders who wanted to use Kraken for derivatives had to route their orders through other exchanges. Now Kraken can handle everything internally – from taking orders to clearing trades and managing risk – just like established Wall Street exchanges.

Part of Bigger Expansion Plans

The Small Exchange purchase continues Kraken’s aggressive growth strategy. Earlier this year, the company bought NinjaTrader for $1.5 billion, adding 2 million customers and access to CME-listed futures contracts. In September, Kraken became the first major crypto exchange to enter proprietary trading through its acquisition of Breakout.

These moves have transformed Kraken from a simple crypto exchange into a multi-product financial platform. The company now offers tokenized stocks to European customers, perpetual contracts to retail traders, and advanced trading tools that compete with traditional brokers.

Kraken’s financial performance supports this expansion. The exchange reported $412 million in revenue during the second quarter of 2025, up 18% from last year. Trading volume reached $186.8 billion, while customer assets on the platform grew 47% to $43.2 billion.

Preparing for Wall Street

Kraken recently completed a $500 million funding round at a $15 billion valuation and is reportedly seeking another $200-300 million that would value the company at $20 billion. Goldman Sachs and Morgan Stanley are advising on the planned IPO, which could happen as early as 2026.

The timing appears favorable for crypto companies going public. President Trump’s administration has taken a friendlier approach to digital assets compared to previous years. Several enforcement actions against crypto firms, including some involving Kraken, have been dropped or paused while new regulations are developed.

Other crypto companies have already entered public markets successfully this year. Circle, the company behind the USDC stablecoin, went public in June at a $31 per share IPO price. Gemini, founded by the Winklevoss twins, completed its IPO in September, raising $425 million at a $3.3 billion valuation. These successful debuts show strong investor appetite for regulated crypto infrastructure.

Competition Heats Up

The derivatives market for cryptocurrencies has grown rapidly despite broader market challenges. Total crypto derivatives trading reached $20.2 trillion in the second quarter of 2025, declining only 4% compared to a 22% drop in spot trading volumes.

Kraken faces competition from other exchanges racing to capture this market. Coinbase operates its own derivatives platform internationally, while traditional finance giants like CME Group have expanded their crypto futures offerings. The Small Exchange acquisition gives Kraken the regulatory foundation to compete directly with these established players on their home turf.

The Bottom Line

Kraken’s $100 million purchase of Small Exchange represents more than just another acquisition. It completes the regulatory infrastructure needed for Kraken to operate as a full-service financial platform in the world’s largest capital market. With derivatives licenses secured across three major jurisdictions and an IPO on the horizon, Kraken has positioned itself to bridge the gap between crypto and traditional finance at a time when that boundary continues to blur.