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The Inquisitive VC – Colleen Sullivan, Partner and CEO of CMT Digital

Colleen Sullivan is a Partner and CEO of CMT Digital, which is, in turn, a part of the CMT Group. Sullivan is focused on crypto asset trading, blockchain technology investments, and legal engagement in the crypto asset and blockchain technology industry. Prior to this role Sullivan worked as a lawyer and founded her own startup in the fintech space.

Colleen Sullivan started working at a brokerage firm called First Options, which was on the floor of the Chicago Board Options Exchange, when she was a teenager. According to Sullivan “spent every summer there” until she graduated from Law school.

Prior to becoming a full-fledged lawyer, Sullivan left First Options in 1999 and co-founded a company called iOptions with two traders. The idea of iOptions was to allow non-high net worth employees to access hedging and monetization strategies for their employee stock options on a transparent and efficient basis.

Sullivan got the idea when she “started to see that high net worth executives with employee stock options would hedge them on an over-the-counter basis with big investment banks like Goldman and Citi. They would then lay off that risk on the floor where I was working.”

The startup raised venture capital and this is where Sullivan met her future business partners, Scott Casto and Jan-Dirk Lueders the founders of CMT Group, who were one of the investors in iOptions.

Unfortunately, iOptions ceased operations because they needed the Securities and Exchange Commission (SEC) to approve a rule change, that would let people with employee stock options use them as good collateral in these listed options hedging transactions. Sullivan met with the SEC in 2000 to propose the rule change and stated that “it took the SEC nine years to approve it. So, basically that delay killed our startup.”

In 2001 Sullivan joined the esteemed law firm Sidley Austin as a lawyer in their investment products and derivatives group. Following this Sullivan had various stints as an independent lawyer and then finally joined the CMT Group, where she eventually became a Partner in 2013.

2013 was also the year that Sullivan started to become obsessed with Bitcoin. She had read the whitepaper and “was very curious how regulators and our legal frameworks would work within that. My goal with iOptions was to democratise financial services, you know to bring these hedging strategies to non-high net worth people and similarly when I looked at Bitcoin thinking this could just open up a new financial system potentially.”

Sullivan’s first act as a CMT partner was to suggest to the two founders that the firm invest in Bitcoin. The two founders encouraged Sullivan to get involved in the legal and regulatory aspect of crypto to really understand how the asset class was going to be treated before they wanted to invest.

So, CMT Digital, the crypto and blockchain-focused arm of the CMT Group was formed and started operations on the legal and regulatory side. Now the firm trades on a proprietary basis globally on crypto spot and derivatives exchanges.

In 2017 the firm also started investing in the space as they started to notice through their legal and trading activity that there were a lot of gaps in infrastructure that would need to be filled in order for this space to grow.

Adding to all this activity the firm started CMT Digital Labs, in January of 2019. The purpose of this was to test products and services in the space. CMT Digital Labs then evolved into the newly launched Chicago DeFi Alliance.

The Chicago DeFi Alliance was formed by CMT Digital in conjunction with other Chicago trading firms including Jump Capital, Cumberland, TD Ameritrade and DV Trading, venture capital firm Volt Capital and DeFi startup Compound are also part of the alliance.

According to Sullivan all of these firms are firm believers in DeFi and think there is a place for it in financial services. They also all noticed the same types of issues concerning startups in the DeFi space.

In regards to how they will assist Sullivan said, “We are really going to focus on the trading side, attracting liquidity, automated market makers versus manual market makers, and then we are going to go into what are the things you need to think about from a legal, regulatory, accounting, tax standpoint. To help the group think through some of the issues they are going to face as they scale.”

The Chicago DeFi Alliance recently announced the first cohort for its program which include well known DeFi projects including 0x, dydx, Kyber Network, IDEX, opyn, Set Protocol, and Synthetix.

When asked about her thoughts on institutional capital entering the crypto space, Sullivan explains how she thinks the space still has a way to go in terms of developing further infrastructure to attract institutional participation and the fact that the market is currently quite small.

“Innovation gains traction in tough times and I think right now we are literally witnessing a new financial and monetary system being built right in front of us, which is just extraordinary. I think all of that makes the space hard for institutional investors to ignore for much longer,” Sullivan states.

When asked about her thoughts on whether or not we will see a bitcoin ETF soon, Sullivan explains that she thinks it’s unlikely unless there is a change in the SEC Chairman. The lawyer turned investor thinks an ETF would be a great product for retail investors to access bitcoin as they are already familiar with the structure of an ETF.

The most recent investment CMT Digital has made is in Horizon Blockchain Games, a blockchain gaming infrastructure company. CMT Digital participated in a US$5M seed round for the company, which was led by Initialized Capital, Alexis Ohanian’s firm, and saw participation from Polychain, Digital Currency Group, Consensys, and Golden Ventures.

Sullivan stated that “they are just a phenomenal team of devs and gamers. They are based in Toronto, we love them and they are moving into open beta this summer. I think the last time I spoke with them the waitlist was 118K people, and they have over 16K in the game right now testing. They have a very vibrant discord and twitch, its a great game, we love it.”


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