While Kraken, Coinbase, Gemini and a handful of other U.S. crypto exchanges cater to retail trading, they've only met state licensing requirements and don't have a federal regulatory imprimatur. Chicago futures exchange CME Group and Chicago-based Cboe Global Markets, which are federally regulated, only offer trading in bitcoin futures contracts, not the currencies themselves.

ErisX, Seed and Bakkt all seek federal agency clearances to build the kind of exchanges that major institutions expect, and they plan to offer cryptocurrency and related derivative trading in one place.

Institutions "want some clarity on regulatory matters, which is gray at best," says Chicago cryptocurrency pioneer Matthew Roszak. "The custody piece is really, really key, and most folks will gravitate toward the branded player."

Wilson, who invested in ErisX through DRW's venture unit, is one such player. He made his name trading eurodollar options and formed one of Chicago's biggest high-speed trading firms. Now he's moved into cryptocurrencies, amassing large positions in bitcoin, launching bitcoin producer Cumberland Mining and investing millions of dollars in crypto startups.

A DRW spokeswoman declines to comment, but Wilson has been public in lining up a long list of ErisX investors. They include big retail broker TD Ameritrade, trading firm Virtu Financial, investment behemoth Fidelity Investments and the Nasdaq stock exchange's venture arm, among others. "He operates at the highest levels in this industry," Roszak says of Wilson. "He plays to win."

While investors won't say how much money ErisX raised, Fidelity and Nasdaq, along with others, invested $27.5 million in December, according to one report. Cboe was part of an earlier October fundraising, and Chicago private-equity firm Valor Equity Partners participated in both rounds.

TALENT

Along with money, ErisX has know-how. CEO Thomas Chippas formerly oversaw global quantitative execution services at Citi. His team of about 50 employees includes Chief Commercial Officer Kelly Brown, a former CME managing director, and Technology Head Tony Acuna-Rohter, an ex-CME software engineer.

Another advantage is ErisX's status as a derivatives clearing market with the Commodity Futures Trading Commission, which oversees the crypto market. ErisX hopes to offer cryptocurrency trading by the end of June and futures contracts by year-end.

Bakkt also has plenty of cash and connections. ICE, which owns the New York Stock Exchange, has raised $183 million for Bakkt from investors including Microsoft. The crypto exchange is using Microsoft's cloud services to build an open system for institutions and consumers alike, but it hasn't clarified its business model or publicly announced a launch date. Bakkt is also seeking federal approvals and recently acquired a futures commission merchant license and staff from Chicago broker Rosenthal Collins.

"This acquisition underlines the fact we're not standing still as we await regulatory approval by the CFTC for the launch of regulated trading in our crypto markets," CEO Kelly Loeffler said in a January Bakkt blog post. "Our mission requires significant investment in technology to establish an innovative platform, as well as financial market expertise to deliver the most trusted fintech ecosystem for digital assets."

Likely the smallest contender, Seed, with $30 million, may also be furthest along. Some cryptocurrencies already are trading on its exchange, and Seed has CFTC approval to act as a swaps execution facility.

Co-founders Brian Liston and Edward Woodford came to Chicago in 2015, after earning master's degrees at the Massachusetts Institute of Technology. They set up a Seed predecessor exchange for industrial hemp but shifted to cryptos last year. Now they're on what Liston calls a "long-term sales effort" to win over major hedge funds.

"Institutional adoption brings with it more volume," says Liston, who provided the multitrillion-dollar estimate based on converting just 1 percent of the world's approximately $320 trillion in wealth into tradable digital assets. "There is huge potential for the space."

This story has been corrected to note that other investors participated alongside Nasdaq and Fidelity in a recent fundraising by ErisX.