FTX.US: A Crypto Future for All ft. Brett Harrison

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This is a podcast episode titled, FTX.US: A Crypto Future for All ft. Brett Harrison. The summary for this episode is: <p><strong>This week on The Jump Off Point:</strong>&nbsp;<strong>Crypto Edition</strong>, host Peter Johnson talks with the president of&nbsp;<a href="http://ftx.us/" rel="noopener noreferrer" target="_blank">FTX.US</a>, Brett Harrison. FTX was started as a cryptocurrency exchange as an answer to the existing derivative exchanges in the world. We wanted to learn how&nbsp;<a href="http://ftx.us/" rel="noopener noreferrer" target="_blank">FTX.US</a>&nbsp;went from being a crypto exchange to the pioneer in attaining retail adoption, and Brett helps us explore what led to the broader vision. He shares the opportunities he sees in the crypto community with a discussion on securities, and also introduces us to&nbsp;<a href="http://ftx.us/" rel="noopener noreferrer" target="_blank">FTX.US</a>'s NFT platform and shares what the future holds for the company. Listen now!</p>
Introduction to FTX
01:51 MIN
The challenges to offering derivatives and futures in the US
01:30 MIN
Where is the opportunity in futures and options?
01:16 MIN
A look into the FTX NFT platform
02:24 MIN
How FTX is evaluating what could be a security
01:48 MIN
Introduction to Pyth
02:29 MIN
What's next for FTX
01:15 MIN
Biggest influences in the crypto community
01:21 MIN

Speaker 1: Cryptocurrencies went on a wild ride today.

Speaker 2: Bitcoin, the digital currency created a dozen years ago as an alternative to cash, is exploding in value.

Speaker 3: What is DeFi?

Speaker 4: Decentralized finance.

Speaker 5: Some well known types of cryptocurrency you may have heard of are-

Speaker 6: Bitcoin.

Speaker 7: Ethereum

Speaker 6: Ethereum.

Speaker 8: NFTS.

Speaker 6: Why don't we all switch to Solana.

Speaker 8: Solana.

Speaker 9: Solana.

Speaker 10: Solana.

Speaker 9: Solana. And Ethereum.

Speaker 11: It's everywhere. And right now the whole DeFi space is exploding.

Speaker 12: Welcome The Jump Off Point- Crypto Edition an original podcast by Jump Capital. By now, you've probably heard of FTX the company and its us entity FTX US are everywhere. From Louis Hamilton steering wheel to the Miami Heat Arena. And true story even recently showed up in a fortune cookie that I opened. Needless to say, they're doing everything they can to ensure a crypto future for all. So how did FTX US go from a crypto exchange to the pioneer in attaining retail adoption? We went straight to the source to find out. Today's host and crypto co- lead at Jump. Peter Johnson is joined by Brett Harrison, President of FTX US. In this discussion, Brett and Peter go deep on everything FTX US from trading tools and its recent LedgerX acquisition to its NFT platform launch, and even super bowl ads. Additionally, for the first time we looked to Crypto Twitter for a few questions they wanted to ask Brett who provides answers later in the show.

Peter Johnson: Hey everyone, this is Peter Johnson. And today we have a guest that I am incredibly excited about. Brett Harrison, who is the president of FTX US. Which has been on an absolute tear, so ton of things to talk about. And Brett is also the second person from the FTX family that has been on the podcast we previously had on Sam Bankman-Fired, who was on with Dave Olsen from Jump. And that episode was actually, I believe the first announcement of our work in the pit network, which we can talk to him about. So I'm really excited to have you on Brett, thanks for being here.

Brett Harrison: Yeah. Thanks so much. Thanks for having me.

Peter Johnson: So I think everybody privately knows what FTX US is, but for anybody that's been living under a rock, what is FTX US and what relationship with FTX more broadly?

Brett Harrison: So again, I'm sure people have heard of FTX at this point, one way or another. But FTX was started two years ago or so, as an answer to the existing derivative exchanges in the world. Derivative exchanges that were either going down all the time or liquidating customers left and right, some of them are still doing that bleeding customer funds in various ways, getting hacked. And Sam who was a trader on all these exchanges realized that there had to be some way of making something better. And so he started FTX and organically grew FTX into the second largest exchange in the world for crypto. A lot of that trading through derivatives. However, that exchange is based offshore. Based outside the United States and services, non US customers. And the reason being that in order to offer a bunch of the products that are on that exchange in the US, you need certain licenses some of which we didn't yet have. But being Sam being from the US and knowing that also the US holds some of the largest capital markets in the world, really wanted to establish some kind of business, some kind of presence in the US. And so to start around a year ago, FTX US launched. It's a completely separate company, separate business line, separate people, separate servers, everything. Although share some of the ultimate beneficial owners in common with FTX. com, but it runs in the US and is primarily a spot cryptocurrency exchange. Or at least that's what it was founded as. We have a handful of crypto pairs that you can trade on the exchange, with a very similar interface to ftx. com. I would say around a year ago we were doing something like a million dollars a day in spot volume, so pretty minuscule and close to nothing. And now we're doing something like 400 million a day in spot volume. And so we're growing exponentially. It's very exciting stuff. And of course we have lots of other crazy ambitions, which I'm sure we'll cover.

Peter Johnson: Absolutely. Yeah. So derivatives is a big one where, I think we're going to get into that quite a bit. But before that, how about you just your background and how did you end up running FTX US?

Brett Harrison: So I started in at Jane Street Capital coming out of college, which is the same as Sam Bankman- Fried, and that's how we met actually. So I was a software engineer, I was an engineering manager at Jane Street. Sam was a trader and the international ETF desk. We had worked a bunch together, even when he was 22 fresh out of college, he was already running a lot of the stuff going on that desk. Probably not surprising to the audience here. And then we both left for separate paths. Sam went to start his crypto trading firm, Alameda. I had left to move to Chicago with my wife to start a family, and so it took some other jobs. And near the end of my time at Citadel Securities where I was running semi systematic trading technology, so encompassing ETFs options, OTC, ADRs. I was planning on leaving and at the time Sam and I had been texting back and forth, and he was like," Hey, you want to come join FTX?" And I said," Yes, let's do it." And I didn't know anything about crypto at the time. It was just sort of like,"Let's just dive in and do it, this is cool. Everything that's going on in this company looks incredible and I want to be a part of it."

Peter Johnson: And, and you mentioned you're in Chicago. I am also in Chicago.

Brett Harrison: Yep.

Peter Johnson: Love to see you building FTX US in Chicago. Why'd you say that decide to stay in Chicago when you came over to FTX?

Brett Harrison: Sure. Well, I mean, it was a combination of reasons. Part of which were selfish, which is I was here and it's fairly well established here as far as my personal situation goes. But also because Chicago is a great place to bring together, a number of different industries. So we of course had the traditional finance industry. We have a lot of the biggest trading firms and hedge funds in the world are here, Jump is here. But we also have futures exchanges here, I think about like the Chicago Mercantile exchange, CIBO. We have offices of different regulators are here, we have people from Solana who work here. Different Solana, adjacent companies are also here as well. So it's a nice sort of little hub kind of in the middle of the country here, where we have different areas of financial innovation coming together in one place.

Peter Johnson: A great trading background, trading talent in Chicago. And as you mentioned, that, the Solana community in Chicago has been really impressive. I do want to ask you a fun question in that when I visited you in the Chicago office, I met one of your dogs. And I have heard that you have a very large number of pets.

Brett Harrison: That is true.

Peter Johnson: So how many pets do you have and what is the story behind the pets?

Brett Harrison: Yeah, so we have 11, five dogs and six cats. I guess the story is so my wife and I are very big welfare animal rights people, like vegan, the whole deal. I mean, she really got me into it, and so we just started adopting pets and just sort of never stopped. And that's sort of like one version of it. The other version is my wife, Hannah had infinite size zero bid out on every single adoption exchange in, in the greater Chicago area. And so you get an email like," Oh, awkward dog with this issue that needs to home at... Oh, take them. There you go you're filled." So that's sort of that the way that this thing is typically go down and we just keep on adopting.

Peter Johnson: You're the liquidity provider for pets in Chicago. Yeah.

Brett Harrison: We're the lead market maker.

Peter Johnson: Yeah. That's great. So one of the big topics I wanted to dive into with you is derivatives. Since that is what, where FTX started with. I think FTX might actually stand for futures trading exchange.

Brett Harrison: Something like that. Yeah.

Peter Johnson: Yeah. Something like that. So, big history in derivatives. At FTX US, as you mentioned, just started with a spot exchange. What are the hurdles for offering derivatives and futures in the US?

Brett Harrison: Absolutely. So in order to be able to be an exchange that offers derivatives products, you need us specific license from the CFTC called a designated contract market license or DCM. And that is a pretty difficult license to obtain, if you apply for one from scratch, it can take anywhere from one to three years. That is only a part of the puzzle, because even if you have the exchange license, you still need to find a place to clear those trades. And in order to clear derivative trade, you have to clear them on something called a derivatives clearing organization or a DCO. And there are very few DCOS in the US, and that license can take up to five years to obtain. So recently FTX US completed the acquisition of a company called LedgerX. Which we have since rebranded to FTX US Derivatives, and LedgerX has the DCM and the DCO. And so it gives us the ability through a number of required approvals and conversations that we still have to have with the CFTC to be able to offer derivatives products in the US. And of course, we're going to start with wanting to do crypto derivatives. So for example, Bitcoin, Ethereum, futures and options. But LedgerX's licenses are very broad. They don't say crypto or derivatives, they say derivatives. And that would potentially give us pretty broad mandate to be able to do other kinds of derivatives, not just for crypto.

Peter Johnson: Yep. And that actually relates to we had a question come in on Twitter from the guys at CMS. Who asked, if the licenses from LedgerX will those allow you to self certify features? And if so, can you list things more than beyond BTC and E, and will that also include perps?

Brett Harrison: Yes. So first of all, the answer is yes, you can self- certify futures. But that doesn't mean you can just do whatever you want. Like we can cert self- certify an iPhone future, and then two days later to CFTC be like," What the hell is this? Take this down, delist this now." And that's not the position we want to be in. What we want to do is we want to discuss and preview and really go through a good certification process with the CFTC. Where there's an understanding of, if we're releasing a new product, is it really the same thing as something that we already have with a slightly different underline or a slightly different flavor? Or is this something entirely new? And we really need to dive in understand, is this actually a future? Is this a proper derivative that belongs on a DCM? What's the settlement process like? What's the index? Can it be manipulated yes or no? Let's makes sure it can't. What's going to be the surveillance around the product? So we can self- certify futures, but we do need to do proper product filings and really understand where the CFPC comes in on a lot of the products.

Peter Johnson: And then on the vision I know of a lot of spot crypto exchanges in the US is having features, having perpetuals, having that all in one screen, being able to seamlessly trade various products. With the LedgerX acquisition, how far away is that vision now for FTX US?

Brett Harrison: Sure. So there's a lot of different steps to what we want to do. And so let's back up a second, the LedgerX right now has a live product. You can trade physically settled options and futures on LedgerX, as a retail customer or institutional customer with no intermediaries. The problem right now is that the license requires that these products are fully collateralized. So it's... So you have to put up a Bitcoin to buy fully collateralized Bitcoin future. It's like spending a Bitcoin to buy a Bitcoin. It's not the most popular product. So we have a couple of things that we need to do. One is we would like to offer a more retail friendly product, possibly for example a cash settle future or cash settled option. The second and the most important thing is being able to offer those on margin. And doing that requires a change to our license designation. And that is going to be a very methodical process by which we have to talk about our margin model, and our backstop liquidation funds, and our risk systems in general with the CFDC. And go get really deep in the weeds and get this approved for what it is. And so that's the big mission right now for us. And that could take three months, it could take 18 months. I mean, it just there's a lot of unknown unknowns that go into that process.

Peter Johnson: Yeah. And then the other kind of regulatory question I have is, LedgerX my understanding is that they have a DCM, which is the exchange. They have a DCO, which is clearing, the SEF, which is for swaps. I don't believe they have an FCM, which is... Typically the way that futures are offered to retail is with an FCM license. Is that something that you need and that are... Will you work with existing FCMS or how will that part Of it work?

Brett Harrison: It's an excellent question. So right now the DCO designation for LedgerX allows us to go direct to retail without intermediation. So right now you, Peter Johnson can register for LedgerX account and you can go and buy a Ethereum call option, without any intermediary going directly to LedgerX. And that model is also very much how all of the derivative exchanges exist outside the US. Like if you are a, I don't know, Malaysian institution or something, and you're going to trade to ftx.com, you don't have to go through an FCM or some sort of equivalent of an FCM, you just trade directly. And we think that that model has a lot of benefits in its simplicity and helps us really understand the risk that each of our customers are facing. So it's you have a buyer and a seller and the exchange, and there's very little else. You're right, though, that on the CME, for example you can't go direct to the CME as a retail customer. There's no CME app, pull up on your phone and buy one S& P 500 mini future. You have to go through some sort of broker, an FCM, a futures commission merchants. And one thing that we're very much considering is how we can sort of disrupt that traditional model and be able to offer margin on futures and options to individual retail customers in the US without requiring some sort of intermediary. And I think this is the thing that will be probably something that's unprecedented in the US, if we can pull it off.

Peter Johnson: And that's very interesting. And yeah, you also mentioned options, I'm curious, your view, futures, options, kind of prioritization, importance of those two types of products, kind of where do you see the opportunity?

Brett Harrison: So the massive amount of the majority of the world's volume of crypto trades through futures. And options are sort of minuscule in comparison. And it's sort of puzzling because you would think that as a highly volatile product, that people would just be more interested in actually trading ball outright. And I've heard a bunch of different theories on this, part of which is that there isn't really a good platform in the US right now for trading crypto options. Again LedgerX has it, but it's not exactly the right product yet, and you have to do fully collateralize. It there's some European alternatives, they don't trade that much and spreads are pretty wide. Some people that say that because of the high implied vault of cryptocurrencies, especially for things like Bitcoin, these options really don't move much with the underlying. And so when people want to get more traditional type of vault exposure with some delta, that if Bitcoin moves and their option price, doesn't move at all, because the flyball's so high, it's not super exciting as a product for someone to use as a speculative instrument, let's say. But that, we really don't know. I think there just hasn't been enough data. There hasn't been enough exciting marketplaces for people to trade these things, to really get a sense of whether this could take off. I mean, it's possible that options could be much more widely traded in the US if we find a pretty use good product for it.

Peter Johnson: And moving from futures and options. It's a little less technical product that you guys also recently launched is the NFT platform. We would love to hear, why you decided to launch the platform and what's your vision for that?

Brett Harrison: Yeah, it's good. It is the complete opposite end of the spectrum. So yeah, we launched an NFT platform. At first, it was something where you could mint your own NFTs. Now it is one that you can also deposit and withdraw Solana based NFTs. So things that are been minted outside of FTX, but you can bring them into FTX and re- list for secondary sale. And there was a lot of thought into why we wanted to build this. One of which was simply, we just saw the enormous amount of secondary volume going up in these NFTs and thought we could certainly do at least a good a job as the other marketplaces and doing this. The second is that all of these existing marketplaces for NFTs are decentralized, and there's a lot of benefits to having a centralized marketplace for NFTs. One, being that just from a legal perspective, it's important that we actually provide a marketplace where there is KYC rules, where there's anti- money laundering rules, where you can prevent wash trading, where you can help people keep track of their transactions for tax reporting. And I think this is something that people haven't really thought enough ahead about, the fact that it's not sustainable in the current world where everything is like a peer to peer DeFi transaction for NFTs. Because at some point this will sort of catch up to regulators. And it's important that we provide a good place for people to do that trading. The second is that a lot of our branding partners and sponsorship partners are super excited about NFTs, whether that be in sports or other kinds of areas of entertainment. And a big part of our deals with them involves some intellectual property in some way that could involve NFTs. And it's important for us to have a really good platform, so we can take advantage of that, and provide an exclusive marketplace for some of these items. And the last is that NFT is a technology, something that we don't really know exactly where it's heading. And it could be something huge or I guess it could fizzle out, but I don't think it will. And one example is in the gaming space. I think there's an enormous amount of investment into blockchain based gaming. And what a lot of game studios are looking for are crypto partners that can help them with most of the vertically integrated services, whether that be fiat on- ramps, KYC, AML, user signups, transaction reporting, taxes. So I think if we can be the white label partner to many of these games and gaming studios, I think that could also be an enormous opportunity for us.

Peter Johnson: And on the regulatory front related to NFTs, or one of the things that you recently did, was announce that you're removing the ability to earn royalties on NFTs on the platform. Which I assume was based on regulatory concerns there. I mean, can you talk a little bit about that decision then if there's been any, reaction from the creator community on that.

Brett Harrison: Sure. Just to clarify. So we allow are the artists, the creators to receive royalties from the secondary sales. What we don't allow is for projects that, say that if you're a holder of the NFT, you get to get some cut of all the royalties. So I like to think of this as, imagine you go on iTunes and you buy a song from Taylor swift, and you buy the song. Well, some amount of the proceeds from that purchase are going to go to the Swifts. Part of it's going to go to Apple. And part of it, might go to Universal or whoever the record label is. And that's sort of normal and expected and that's something that everyone understands very well. Now imagine that if you buy the song, you are now entitled to a cut of all of Taylor Swift's tour revenue for the next year. Well, that starts to look like an investment contract. You are buying something which is sort of entitling you to some revenue stream of another company. And if that's an investment contract, if that's anything like a security, well, if it's unregistered, you need to be an accredited investor in order to be able to take part in something like that. Or it needs to be a registered security. So what we want to make sure is that NFTs, which are at the end of the day, just arbitrary tokens, and therefore you can build arbitrary complexity contracts on top of them. We really want to make sure that these things are collectibles, there art, but there are not securities in disguise. And so that's sort of a... A big consideration for us is that again, we want to be the legitimate marketplace for these kinds of products. And we want to make sure that they're not something that we aren't allowed to support, and that you are not allowed to support in this country, at least.

Peter Johnson: On the question of what is a security? That's something that a big question in the industry right now. I think that Gary Gensler has made it pretty clear that he thinks that a good number of tokens that trade on exchanges in his view are securities. So at FTX US how do you think about evaluating what might be a security, and also thinking about the potential risk that the SCC one day says, that a large number of tokens out there are securities.

Brett Harrison: Yeah. So FTX US in particular has taken a very conservative view about token listings. And if there is, as you have described, there's precisely this regulatory uncertainty about which tokens are securities or something. Like securities, what are more like commodities? What are not like none of the above. And therefore, if we're not a securities exchange what does it mean in terms of what we can list and what we can't list? And as also people might know there are these tests, there are guidelines for trying to determine what a security is, but they're highly fact specific, they're highly complex. And it's not like, just because you've done some research and you get one legal opinion that says the thing's not a security that you're suddenly safe. What do you need to be safe from? You need to be safe from enforcement action, let's say by the SCC. And you need to be safe from a class action lawsuit from your customers, who if they find out that they were buying an unregistered security and they lost money from it, maybe they can sue you for the losses. So I will say one of the most popular things that people tweet at me on Twitter is," Why not list this coin?" You know, or" Why does Coinbase have more coins than you have?" And I think the answer is, well, because we're taking the long view. That, yes there's a long tail of token out there that people might be interested in trading, but if we're going to support a marketplace, that's going to mature in this industry, in a way that works well with where the regulatory landscape is shaping. We need to just take a longer view about what we're going to list, and be really deliberate and thoughtful about it. And think more about our derivative aspirations about NFTs, about other kinds of growth in our spot marketplace, that don't just rely on listing tokens that are in this regulatory gray zone.

Peter Johnson: And everybody wants more tokens. I feel like that's a consistent theme. One way that more tokens can be offered or at least people access the longer tailed tokens is decentralized exchanges. FTX, very close partner with Serum, jump also is a close partner with Serum. Which is one decentralized exchange. How do you think about offering FTX US customers access more things within DeFi?

Brett Harrison: Sure. Yeah, I definitely think that as DeFi grows, and starts to reach into the sites of regulators, there's going to need to be some answer, that's not just either shut the whole thing down somehow. I really don't actually know how you do that, but shut the thing down somehow. Or let the whole thing run without interruption. I think there's probably going to be some middle ground like permissions DeFi. Where in order for people to be able to access these services, they need to go through some permission gateway, where if you can make sure they're not part of some OFAC sanctioned nation, or they're not some known criminal or hacker or something. And also that we actually know what values of assets are being traded through the system, so we can actually guard against systemic financial risk. This is of course going to be, on top of mind for regulatory agencies and different bodies of government, as they think about," As more and more money pours into DeFi, are we ending up with some sort of systemic risks to the financial system as a result?" It's very important for us to think about, I think that can't be understated. So I see a vision in which DeFi and CeFi kind of grow together. Where exchange like FTX US maybe provide some sort of permission gateway to these services. We've had a number of kind conversations with the CFTC with regards to derivatives, where there's a possibility that our licensed venues could end up as either trade printing facilities or clearing houses for derivatives contracts that might trade over DeFi as well. So I think there's a bunch of options there that could result in a nice marriage between a CeFi exchange like ourselves and DeFi like Serum.

Peter Johnson: And as you are looking at things within DeFi, I know FTX probably has been partner with Solana starting with the NFTs on Solana. How do you think about where to build or where to partner within DeFi? Is that at Solana centric? How do you think about the different chains and ecosystems?

Brett Harrison: Yeah. At the end of the day FTX formed this strategic partnership with Solana in terms of what we support and what we want to encourage people to use. Based on the knowledge that we all want the crypto ecosystem to evolve, and grow, and mature, innovate. And in order for that to happen, there needs to be blockchains that support some large number of transactions per second at low cost. This is just sort of a just absolute necessity. If we are going to want to have gaming transactions happen entirely on a blockchain, if we're going to want social media to happen entirely on a blockchain or a financial market, an order book, or like pit. An actual full market data stream to happen on a layer- 1 blockchain, it can't be something with 10 transactions per second, that costs you a hundred dollars per transaction. It's just not going to happen. That's not to say that we are opposed to working with other blockchains or even some of the existing through slower layer- 1s. For example, in the NFT space, it's still the case that the majority of NFT volume happens on Ethereum. And one thing that we're working on is being able to support Ethereum based NFTs on FTX NFTs as well, and letting people do cross chain and transactions between Ethereum and Solana. Who knows what's next, in terms of other blockchains, that might support NFTs. So our goal is to sort of support as large as swat of the ecosystem as possible, but really making strategic investment into the places that we think have the best chance to help grow the ecosystem.

Peter Johnson: And at Jump, we firmly believe in a multi chain ecosystem. We're very excited about Solana. We're also excited about cross chain bridges, like Wormhole, which are kind of helping enable that interoperability. You did mention Pyth there, which is something we're also very excited about. We were partners with Pyth, FTX is a big partners with Pyth. What is Pyth? And are you guys excited about it?

Brett Harrison: You can tell everyone better than I can, but one thing I'm excited about in general. In the crypto world in general, having come to traditional finance is accessibility and openness of data, and in general transparency of data. So not many people in the crypto world might know this, but in traditional finance market data is ludicrously expensive. Just to get a single equities exchange, full order book might cost you 20 to$ 50,000 a month for one feed, one connection. And on top of that you're paying, per user per machine that uses the data, per different data center that you distribute the data to. How often are you displaying it? What form? And it's just very complicated. And it's a huge barrier to entry to getting into trading space at all. If you want to have a full broker dealer running, where you have connections to every exchange with all the best order book feeds from every single one of the 13, 14 US equity exchanges, you're looking at tens of millions of dollars a year in market data bills. If you compare that to the crypto exchanges, you can open up your Chrome and open up your developer console and connect the web socket to FTX US's order book and start receiving the data for free, full order book. And also no one has special access. So all our exchange runs in the one of the Amazon cloud EC2, sorry, AWS. And if you want to access that as a person in your garage, or if you want to access that as Jump Trading, it's the same. And so I'm a big believer in this idea of sort of changing the financial incentives for companies by forcing people to provide data for free that's open. And I think that Pyth is an important part of that. So Pyth is an oracle that's supposed to be able to take market data and provide some good estimates of let's say fair values for all sorts of financial instruments on the Solana blockchain. And that data can be used for user interfaces, it can be used for trading. It can be used for smart contracts which might need good oracle prices in order to be able to settle the conditions of the smart contract. And it's really awesome to see all of these different traditional exchanges like Jump, like my old place, Jane Street. These different companies that are saying we want to contribute to this platform. We want to be able to provide pricing into it, and take a part in this sort of new paradigm of trying to allow people to access this data in a free and open way. So. Yeah, it's all pretty exciting.

Peter Johnson: Yeah. And it's something that is, I would say fairly new. If you look at traditionally how these large firms operate. There's not a ton of things that they collaborate closely on. And with Pyth there is I believe 40 of the top trading firms exchanges in the world collaborating on this oracle data project. To put high quality data into smart contracts, on Solana, so you can build these new products. It's really a different mindset, I think crypto that it's not a zero sum world. We can collaborate, we can build things together, it's composable.

Brett Harrison: Yeah. Absolutely.

Peter Johnson: It's really exciting. I also wanted to talk about just the marketing kind of sponsorships, everything that FTX US is doing. It's seems like you guys are playing a different game than everybody else. The size of the deals that you're doing, this speed that you're doing them, how did this come about? How did you guys end up being everywhere over the last few months?

Brett Harrison: Sure. Yeah. So I think, some of this predates my joining FTX, and I only joined in may of this year. The story goes is, Sam really wanted to establish this presence in the US especially, and it's very difficult having an exchange at that time, that was four or five months old, up against 10 year incumbents, like Coinbase or Kraken. And how do you get users to trust some new exchange that they'd never heard of? When a lot of exchanges are getting kind of a bad rap, it's like a lot of noise in this industry. And Sam thought," Well, look, we could do something that's fairly diffuse and conventional, like start going out and doing traditional ads spend." Going out and buying Google ads or Facebook ads and trying to get people to switch that way. Although I don't know about you, I don't think I've ever Googled something. And then there's an ad that comes up for JP Morgan and suddenly I'm going to switch all my bank account from Citi to JP Morgan, because I saw an ad. It doesn't really happen that much, maybe I'm wrong about that. I don't know, and you somehow didn't crosstalk

Peter Johnson: I don't think so.

Brett Harrison: But Sam said," What's the biggest thing we can do. I want everyone to just sort of think about this for a bit, everyone go out and aim as high as possible." And someone came back and said," What do you think about naming a stadium?" And Sam was like," Yeah, that's basically in line with what I'm trying to say. Let's do something huge like that." And, and then it came together. American Airlines was ending their long term contract with the Miami Heat Stadium, and they were looking for a new partner. They were looking for a very forward looking innovative partner. They were looking for someone who would work directly with the county on various initiatives, like anti- violence initiatives, and it just worked out. It was the right place at the right time, and we named the Miami Heat arena, the FTX arena. And all of a sudden FTX was on the map. All of a sudden they were 10, 50, a 100 million people who had some impression of FTX now, and that value can't be understated. And I think maybe what other companies might get tripped up on is, if you can't directly and obviously measure return on investment, then spending that much money on a property like that feels like way too big, a risk. But I think the founders of this company understand some amount of risk taking and expected value computations, based on previous experiences at other companies. And at some point you just have to sort of jump in and take some risks and think," No. There's very little else that we could do that could have as large impact as something like this." As something like behind home plate on the umpire's chests, on their badges, behind every single play that gets highlighted every single game. These are the kinds of things where it's difficult to measure exactly what the return is in that investment. But we know it's probably huge given just the sheer size of the audience that gets to see and think FTX all the time. And it lends a lot of credibility to us because, you have to take an old institution like Major League Baseball. What do you think it took them to partner through their first ever crypto partnership. An enormous amount of time and due diligence and discussion to get comfortable with us as a company, to get comfortable with our people, with product, with our safety and security, with our compliance. And that also is a way of sending a strong signal to people who are looking for alternatives to existing players and thinking," Well, what works? Well, how about this one that this trusted institution has already worked with?" And so it's been really, really cool for us to get to do a lot of these giant partnerships.

Peter Johnson: So are you going to see a Super Bowl commercial this year?

Brett Harrison: I think that is public, that you'll likely see a Super Bowl commercial. That is all I will say about it.

Peter Johnson: Oh, big news. This is very exciting. I am looking forward to the potential Super Bowl commercial this year. Well, we talked a lot about different initiatives that you're working on a lot of big initiatives. What is the big thing that's next for you?

Brett Harrison: Yeah. So look, we're firing on a bunch of different fronts here. The derivatives and FTX US derivative is going to be a very large focus for us over the next year or so. And that is because we think that, the derivative landscape in the US is not super competitive. There's really the CME and ICE and CIBO, and a few others who are really competing in this space. And we think we have a real opportunity to break that up, and shake it up and provide a better marketplace for derivatives in general. And with equities, as well as with crypto more volume trades through derivatives than they do through the underlying spot or cash products. So there's a lot that we're going to be focusing on there, we're going to continue to build out our NFT platform. Think about other sort of more traditional investing kinds of products that we might be able to offer through our app. We would like to build a fairly generic payments and trading services app. Where anything that you might want to do with your dollar, whether it's buy a share of Apple, or buy a Bitcoin, or buy an NFT, or just put it somewhere where it can be stored and be safe,that can all happen in one place. And that's our vision for where this is heading. And so we're going to be doing what we can to get there.

Peter Johnson: And as you build that out, are there other acquisitions that you might be potentially looking at or types of acquisitions?

Brett Harrison: Yeah. So we're definitely always getting looks on the potential for new acquisitions. I would say the things that we're looking at probably split into two main camps. One are cases where a company might have large user bases. That if we can acquire and convert those into FTX US users, or FTX users, well, that could be very valuable to us. Our entire product comes from our user base. And so any kind of shortcut on user acquisition could be good. I mean, the acquisition of Blockfolio and turning that into our retail FTX app, that was very much in the spirit of what we're talking about here. Two, would be that the company itself has some sort of, whether it be technology or license, that will be a shortcut for us to acquire rather than to try to build that ourselves. If you think about things in the gaming space, for example, with our very small double digit number of software developers, which probably surprises most people compared to other companies. We're not going to go out and build the next Axie ourselves. That is an enormous project that requires like huge numbers of software developers and game designers and asset designers and just a huge staff, that it's just not going to be our comparative advantage. But maybe there's companies out there that are building the next one, they're looking for a blockchain partner of some kind, or a crypto partner of some kind. And we could work with them as in a partnership sense, or we might be able to acquire them. Or think about LedgerX. So LedgerX had this great team with this great technology and the licenses that would allow us to achieve a major goal of ours. That's another example of sort of an acquisition target that we're generally looking at.

Peter Johnson: And last question I'd like to ask. There is so many resources and so many smart people in crypto. What are the people or the resources that have been most influential in how you think about crypto?

Brett Harrison: I'll give two answers to this personally. So one is obviously it's helpful to be inside of FTX. Which is so close to of the pulse of what's going on in crypto. But being in Chicago and being around the Solana team, for example, and seeing what they're experiencing and just being able to walk over and have coffee with guys like Bartosz and Jordan, and just chat about what's going on in the Solana ecosystem has been enormously valuable. Especially for like me who didn't know what a blockchain was eight months ago. So I think that's one thing. Another thing that I did not have prior to joining FTX was a Twitter account. And working inside of super secretive trading firms doesn't afford you much opportunity to talk on social media. But just being a part of Crypto Twitter and any of these. There's a lot of noise there, but just sorting and be able to see who are people really looking to for guidance here? What are people saying about the product? What are people saying about different cryptos? What are people saying about the markets? That's also been good for me, just to sort of experience through their eyes and what they're writing about. What's important and what's happening. So I'd say been kind of my mix of getting into this space from a resource perspective, has been the Solana team nearby here in Chicago and to some extent to social media and Twitter.

Peter Johnson: Well, Brett this has been a really enjoyable, a really informative conversation. Thank you so much for coming on.

Brett Harrison: Yeah. Thank you anytime.

Speaker 15: Thank you so much for listening to this month's episode of The Jump Off Point, an original podcast by Jump Capital. If you have an idea for the show or know of someone who would make a great guest, please contact podcast @ jumpcap. com.


This week on The Jump Off Point: Crypto Edition, host Peter Johnson talks with the president of FTX.US, Brett Harrison. FTX was started as a cryptocurrency exchange as an answer to the existing derivative exchanges in the world. We wanted to learn how FTX.US went from being a crypto exchange to the pioneer in attaining retail adoption, and Brett helps us explore what led to the broader vision. He shares the opportunities he sees in the crypto community with a discussion on securities, and also introduces us to FTX.US's NFT platform and shares what the future holds for the company. Listen now!

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Brett Harrison