Kraken Buys Small Exchange for $100M, Gains US Derivatives License

The acquisition of Small Exchange marks Kraken’s formal entry into the U.S. derivatives market, providing the crypto exchange with the regulatory foundation to design and create markets for exchange-listed derivatives. Small Exchange, founded in 2017 and previously owned by British financial services firm IG Group, operates as a CFTC-regulated contract market specializing in futures, derivatives, and options trading. This purchase gives Kraken the critical regulatory approval it has been seeking to launch what it describes as a “fully U.S.-native derivatives product suite” within a unified trading environment.

According to the deal structure revealed in the announcement, the $100 million transaction was structured with $32.5 million in cash and $67.5 million in stock from Kraken’s parent company, Payward. While no specific timeline was provided for when derivatives trading will become available to U.S. users, the acquisition immediately grants Kraken the right to operate in the U.S. derivatives space under CFTC oversight. This move comes shortly after Kraken began offering CME-based futures trading to U.S. customers in July, indicating a coordinated expansion strategy.

The timing of Kraken’s acquisition aligns with significant regulatory developments in the United States, including the recent signing of the GENIUS Act and Clarity Act, which have provided futures trading with substantially more regulatory clarity than previously existed. This regulatory landscape shift has created favorable conditions for established crypto exchanges like Kraken to expand their offerings beyond spot trading into more complex financial instruments.

Arjun Sethi, co-CEO of Kraken, emphasized the strategic importance of the acquisition, stating that the deal “connects spot, futures, and margin products inside a single regulated liquidity system, reducing fragmentation, lowering funding latency, and bringing onshore the kind of access and performance that has mostly existed offshore.” This integration addresses a key challenge in crypto markets where trading activities have often been fragmented across multiple platforms and jurisdictions.

Under the terms of the agreement, IG Group will maintain its partnership with Kraken and continue distributing products through Small Exchange, ensuring continuity in existing business relationships while transitioning ownership. This ongoing partnership reflects the complex web of relationships developing between traditional finance institutions and crypto-native companies as the industries continue to converge.

The Small Exchange acquisition represents the latest move in Kraken’s multi-year strategy to build out its derivatives capabilities through strategic acquisitions. Earlier this year, Kraken acquired futures trading platform NinjaTrader in a $1.5 billion deal, citing similar benefits including increased performance and market access. In September, the company further expanded its portfolio with the acquisition of proprietary trading platform Breakout.

Kraken’s derivatives expansion extends beyond U.S. markets. In 2019, the exchange acquired Crypto Facilities, a UK FCA-regulated Multilateral Trading Facility (MTF), which preceded Kraken’s launch of futures trading in the European Union earlier this year. This pattern of strategic acquisitions demonstrates Kraken’s systematic approach to building global derivatives capabilities through both organic growth and targeted purchases of established platforms.

These expansion efforts come amid reports that Kraken is planning an initial public offering, with Bloomberg sources indicating a potential Nasdaq listing in January 2026. The timing of these acquisitions suggests Kraken is positioning itself as a comprehensive trading platform with robust derivatives offerings ahead of its anticipated public market debut, potentially enhancing its valuation proposition to public market investors.

The Kraken-Small Exchange deal reflects broader trends in the convergence of traditional finance and cryptocurrency markets. IG Group, while selling Small Exchange to Kraken, has simultaneously been expanding its own crypto capabilities, having been granted a cryptoasset license by the UK’s Financial Conduct Authority in September after beginning to offer crypto trading to UK customers in June. This bidirectional movement between traditional finance and crypto suggests increasing institutional acceptance and integration of digital assets.

For U.S. crypto traders, Kraken’s entry into the derivatives market represents a significant expansion of available trading products and could potentially bring more sophisticated trading strategies onshore that were previously only accessible through offshore platforms. The unified trading environment that Kraken aims to create could streamline operations for professional traders and institutions seeking exposure to both spot and derivatives crypto markets.

As regulatory frameworks continue to evolve and major exchanges like Kraken expand their product offerings, the landscape for crypto trading is becoming increasingly institutionalized and integrated with traditional financial markets. The Small Exchange acquisition positions Kraken to compete more effectively in the growing market for regulated crypto derivatives, while simultaneously strengthening its case as a comprehensive financial platform ahead of its anticipated public listing.