A new type of crypto exchange called Rails is launching in the U.S. this week. Backed by $20 million in funding, including $14 million in new token warrants, Rails wants to stand out in a crowded field by offering U.S. traders a popular but hard-to-access type of asset: perpetual futures, or perps.
Perpetual futures are a crypto-specific type of derivative and have been offered for years at offshore exchanges, but not in the U.S. until recently due to regulatory uncertainty.
In an interview with Fortune, Rails cofounder and CEO Satraj Bambra said the new exchange decided to launch perps in the U.S. after consulting with lawyers and working with regulators overseeing the market. “This is not random,” he said. “No one would do this in the previous administration.”
FTX 2.0
Not many crypto founders, or their investors, would evoke the image of the failed crypto empire FTX. Still, both Bambra and his chief backer, Slow Ventures’ Sam Lessin, said their goal for Rails is to build a better version of Sam Bankman-Fried’s collapsed exchange.
Perps lie at the center of that vision. Most U.S. exchanges offer spot trading for popular cryptocurrencies, meaning users can buy and sell digital assets like Bitcoin and Ethereum at their current (spot) price. Many sophisticated traders, however, prefer a wider array of products that allow them to speculate on the future price of the asset, whether it rises or sinks. Such tools, called derivatives, allow traders to bet on price movement without holding the underlying asset.
While derivatives are common in traditional finance, crypto’s 24/7 nature gave rise to a new type of tool through perps, which operate like futures contracts but don’t expire. “We’re a true trading platform,” said Bambra. “You want to be able to play both sides of the market.”
FTX rose in popularity in part because of its suite of trader-friendly tools, including perps, though it never launched the product in the U.S. “Obviously, you need exchanges to be really high performance and good for traders, which FTX was in its day,” said Lessin. “Save for the big issues.”
One of the core issues with FTX was that the exchange held its users’ assets rather than allowing them to self-custody—a problem that infamously blew up because Bankman-Fried used them to fund his own venture investments and luxury real estate.
Bambra himself is a crypto trader, running the $100 million liquid fund for the top Canadian crypto venture firm Round13. He said that the operation had a “significant” amount stuck on FTX, which it later recovered in the bankruptcy, though he declined to give a specific figure.
Rails is deviating from the FTX model, which is also practiced by many centralized U.S. exchanges, by offering on-chain custody to its users, which Bambra argued allows for increased transparency. The matching engine for Rails, however, is centralized, which Bambra said will allow the company to offer the speed of competitors like Coinbase while offering the on-chain verifiability of decentralized exchanges like Uniswap.
“This is an idea that’s extremely native to the builders,” said Lessin. “They’re solving their own problems.”
Bambra cofounded the company with his wife Megha Bambra, who is the CTO of Rails; the former COO of Grindr, Rick Marini; and the lawyer Brent Vegliacich.
Regulatory clarity
Rails previously announced a $6.2 million funding round and its intention to launch offshores in March 2024, but the election of Donald Trump allowed the company to change its plans. The CFTC has evolved its guidance on perps, with outgoing commissioner Summer Mersinger saying in May that perps could receive regulatory approval in the U.S. “very soon.” (Mersinger left her post to lead a crypto trade association.) The shift is part of a broader sea change under the Trump administration that has seen agencies loosen their approach to crypto regulation.
Other exchanges are dipping their toes into launching perps in the U.S. In March, Coinbase announced it would start offering the product in May, though it is limited to a specific subset of users. Coinbase previously launched perps in overseas markets in mid-2023.
Rails will represent the first major launch of the product in the U.S. that is available to both retail and institutional users. It is going live this week with trading for four top assets: Bitcoin, Ethereum, Solana, and XRP, with a plan to add more over the summer, according to Bambra.
Rails is also planning to integrate its own native token into the platform—an approach taken by other exchanges like FTX and Binance, but not U.S.-based ones due to regulatory fears. Bambra said that Rails’ token, which it plans to launch this fall, will differ from other exchange tokens like FTT and BNB because users won’t be able to use it for collateral, but instead for other functions like volume discounts. The fresh $14 million in funding is through token warrants rather than traditional equity.
Bambra added that the token will be listed on Kraken, which is backing Rails.
Though the exchange will be available in other international markets, Rails’ embrace of esoteric products for a U.S. customer base reflects the country’s shifting approach—and appetites. “Crypto traders are inherently a little bit more sophisticated because of the degenerative nature of the space,” said Bambra.
