Are Prop Firms Regulated? What 10 Regulators Actually Did

No: as of November 2026, none of the 10 financial regulators reviewed here, across the US, Canada, the UK, the EU and Australia, has a licence or rulebook written for retail prop firms (companies that sell a paid evaluation, or "challenge", and pay a profit share to traders who pass it). That does not mean no law applies: regulators have acted with general powers, from public warnings to one SEC settled order in 2020 and one CFTC fraud case that a federal court dismissed with prejudice in May 2025 as a sanction against the CFTC itself.

Do prop firms need a licence to operate?

No licence category written for evaluation firms exists in any of the 10 jurisdictions below, so selling challenges does not by itself require one. Where a firm also holds customer money for live trading, provides investment services or advises clients, the ordinary licences for those activities can apply.

Each row is the most specific action a regulator has taken on evaluation firms.

Compiled by Phoenix Technologies from each regulator's own site and the federal court docket, fetched November 5, 2026; method: one row per regulator, its most specific prop-firm action, "none" where its site showed nothing.

The last column reads 0 of 10. Every action on record is a warning or an enforcement case under a law written for something else, so the popular line that prop firms are "completely unregulated" is half right: no sector rule exists, but general powers have been used against individual firms.

Are prop firms regulated in the US?

Not as prop firms. US futures registration attaches to specific activities, and selling access to a simulated account with a profit share does not, on its face, match any of the four main categories the National Futures Association (NFA) lists.

A futures commission merchant (FCM) accepts customer money to support futures orders; an introducing broker (IB) solicits orders "but does not accept money or other assets from customers to support these orders"; a commodity pool operator (CPO) runs a pool; and a commodity trading advisor (CTA) "for compensation or profit, advises others" on futures.

The fee is not margin (no FCM), there are no exchange orders for the firm to solicit (no IB), there is no pool (no CPO) and the firm does not advise the trader (no CTA), so the path exits at "no category on its face". Letting others copy your trades for pay is a separate question, covered in whether copy trading is legal.

On October 23, 2020 the SEC settled with Tradenet Capital Markets, an Israeli education firm that sold packages of $500 to $9,000 including simulated accounts to over 5,000 retail investors, finding that "the contracts to provide funded trading accounts were security-based swaps under the U.S. federal securities laws." Tradenet paid a $130,000 penalty; its model involved stocks, so the theory does not carry over automatically to futures.

The CFTC used retail forex law instead: its 2023 release says the complaint charged My Forex Funds with "fraudulently soliciting customers to trade leveraged, margined, or financed retail foreign exchange (retail forex), and leveraged retail commodity transactions." The theory was that the firm stood as counterparty to off-exchange forex trades, not that selling evaluations is a registered activity.

One myth to retire: the SEC's 2024 dealer rule (Rules 3a5-4 and 3a44-2) is not prop-firm regulation. It targeted liquidity-providing proprietary traders and funds, and according to McDermott Will & Emery a Texas federal court vacated it in full on November 21, 2024.

What happened in the CFTC's My Forex Funds case?

The CFTC lost and was ordered to pay. A federal court in New Jersey dismissed its case against Traders Global Group (trading as My Forex Funds) with prejudice on May 13, 2025, as a sanction for the agency's own conduct, and on July 11, 2025 ordered the CFTC to pay the defendants $3,148,484.22 in fees and costs.

The complaint was filed on August 28, 2023. The next day Judge Robert B. Kugler froze assets and appointed a temporary receiver, and the Ontario Securities Commission (OSC) issued a temporary cease trade order. The CFTC alleged that more than 135,000 customers had paid at least $310 million in fees since November 2021, roughly $2,300 each; these allegations were never tried.

A court-appointed Special Master, retired judge Jose L. Linares, found in a report dated April 30, 2025 that the CFTC's conduct "was willful and undertaken in bad faith", and Judge Edward S. Kiel adopted it on May 13, 2025. That day the CFTC's Acting Chairman, Caroline D. Pham, said in a statement: "This case is a wakeup call to those of us who hold and serve the public's trust."

Picture the record on one timeline from 2019 to this article's date. One marker in February 2024 is drawn in a different colour, because a software vendor, MetaQuotes, cut platform access for prop firms through brokers; MetaQuotes is a vendor, not a regulator (see DXTrade versus MT5 for CFD firms). Two brackets close it: 624 days from complaint to dismissal, and 541 days from dismissal to November 5, 2026.

Two opposite myths come out of this case, and the record supports neither. It did not prove prop firms are fraudulent, because the case ended without a ruling on the merits, and it did not prove they sit outside CFTC jurisdiction, because the defendants' motion to dismiss was denied as moot and never decided. The claim that the CFTC was ordered to pay about $3.1 million is true, but that order was signed in July 2025 and entered on the court docket on July 14, 2025, when the case was closed.

The fee award against the CFTC is 24.2 times the $130,000 penalty Tradenet paid the SEC: of the two US cases here, the larger sum was owed by the regulator to the firm. In Canada, a press release issued for the My Forex Funds side on February 25, 2026 reports that an Ontario court ordered the OSC to pay C$80,000 in costs.

Are prop firms regulated in the UK?

No. As of November 2026 we found no FCA rule or guidance written for evaluation firms; it uses its general tools, the Warning List of unauthorised firms and the financial promotion rules.

On August 12, 2025 the FCA added "Funded Trader" to its Warning List as a firm it has not authorised, noting no Financial Ombudsman Service access and adding: "You also won't be protected by the Financial Services Compensation Scheme (FSCS) if things go wrong."

The FCA's 2024 promotions data shows 19,766 promotions by authorised firms amended or withdrawn after its intervention, up 97.5% from 10,008 in 2023, and says "we issued 2,240 alerts in 2024" about unauthorised firms and individuals, with no prop-firm breakdown.

Pressure for a UK rule has been small. A Parliament petition for FCA regulation of prop firms ran from January 26, 2026 to July 26, 2026 and closed with 24 signatures, against 10,000 needed for a government response. Its premise: "Proprietary trading firms offering funded accounts operate widely in the UK without FCA regulation."

Are prop firms legal in Europe and Australia?

They are not banned. As of November 2026 none of the European or Australian regulators reviewed here has banned evaluation firms; three EU national regulators have issued public warnings, and Spain's said the activity sits outside its remit.

Spain's CNMV warned on June 6, 2019 about funded trading accounts sold with paid courses, stating that "la impartición de estos cursos o la apertura de las citadas cuentas no entran dentro del ámbito de actuación de la CNMV" (our translation: the courses and accounts are outside its scope). Trading carried out from those accounts, it added, could still fall under its supervision.

Belgium's FSMA warned on March 7, 2024, under the heading "shadow investment game": "The FSMA warns the public against the risks associated with the activities of so-called prop trading firms." It also states that such firms hold no authorisation to provide investment services. Italy's Consob followed on July 8, 2024, as reported by ANSA, warning about paid challenges that promise a move "da un'operatività simulata ad una presunta operatività vera" (from simulated to supposedly real trading), after complaints about test difficulty and unpaid profits.

Consob did not ban prop firms in Italy; its release is a warning. ESMA's news listing from August 3 to October 29, 2026 has no prop-firm statement. CySEC's chairman, who also chairs ESMA's Risk Standing Committee, told Finance Magnates in June 2026: "To the best of my knowledge, ESMA is not currently engaged in any substantive discussions regarding retail prop trading" (republished by CySEC).

In Australia, ASIC's 2026 document log holds nothing on prop firms, and its action against unlawful finfluencers, part of a global week of action, named CFDs and OTC derivatives, not prop trading. In France, we found no AMF document on evaluation firms. Non-US payout questions are in payout basics for non-US traders.

Is a prop firm regulated if it owns a regulated broker?

Only the regulated entity is. Registration attaches to one specific legal entity, so a brokerage affiliate or a broker in the same group does not turn the evaluation into a regulated product.

Topstep shows the split. As of November 2026, its risk disclosure says "The Trading Combine, Express Funded Accounts and Topstep Labs experiments are realistic simulations of trading under actual market conditions" and names an affiliate, Topstep Brokerage LLC, as the registered introducing broker and NFA member (NFA ID 0567079). A May 2026 trade-press article described Topstep's registration differently; the firm's own disclosure is the better source.

Registration belongs to the legal entity that holds it, not to every product sold under the same brand.

FTMO completed its purchase of the OANDA group on December 1, 2025, and its press release says "FTMO plans to maintain the OANDA group as a fully standalone business." Check what your account is in the agreement; simulated versus live funded accounts lists the clauses.

Is prop firm regulation coming in 2026?

We found no regulator document announcing it. Of eight specific 2026 claims repeated in regulation roundup articles, none traced to a regulator document as described: one pointed to a real notice on a different subject, and seven turned up nothing on the regulator's own site as of November 5, 2026.

The table shows each claim, where we looked and what we found.

Checked by Phoenix Technologies on November 5, 2026; method: a claim counts as found only if a document with that date and subject is on the regulator's own site. Tally: 0 found as described, 1 different subject, 7 not found.

The CFTC claim is the most repeated, so it got the widest scan: 74 consecutive CFTC press releases, 9250-26 (June 11, 2026) to 9323-26 (November 5, 2026), none about prop firms, funded traders or challenge fees. The one CPO and CTA proposal in that window, release 9284-26 of August 18, 2026, says "the proposed rule aims to reduce duplicative and overlapping regulation" and never mentions prop firms.

Picture the eight claims as rungs on a ladder. Seven rungs end in "not found", one in "different subject", and the top rung, "found as described", stays empty.

A listing scan cannot rule out a document posted elsewhere on a site, and the IRS and UK-Cyprus rows rest on web searches only, so read "not found" as "not on the regulator's site as of November 5, 2026".

What protection do you have if a prop firm does not pay?

Mostly your contract and your own withdrawal habit. Evaluation fees you have paid and an unpaid profit share sit with a private company, with no segregation of funds, no CFTC reparations unless the firm was registered, and for unauthorised firms in the UK no ombudsman or FSCS cover.

Compare money held at a registered futures broker. The CFTC says customer funds at an FCM "must be kept apart" from the FCM's own funds, in segregated accounts with a preference in bankruptcy. Its reparations program is open only if the firm "was registered with the CFTC at the time of the alleged wrongdoing or at the time the complaint is filed."

Worked example, with illustrative inputs and no firm named:

1. You buy three $150 evaluation attempts: 3 x $150 = $450 in fees.
2. You pass, and the account shows $5,000 of simulated profit. At a 90% split your claim is $5,000 x 0.9 = $4,500.
3. Total exposed to a private company with no regulator behind it: $450 + $4,500 = $4,950.
4. Now request a payout each time simulated profit reaches $1,000. Your largest unpaid claim falls to $1,000 x 0.9 = $900.

The fees are gone once paid; the habit shrinks only the claim, from $4,500 to $900, and it is the one protection here that depends on you. Payout minimums and schedules vary, as covered in how prop firm payouts work.

Picture the same $4,950 taking two paths. Path A goes to a private company, with no segregation, no reparations forum and no ombudsman; a side branch shows the withdrawal habit cutting the claim to $900. Path B sits as your own margin in segregated customer funds at a registered FCM.

If a firm closes, an unwithdrawn balance becomes an unsecured claim (see when a prop firm shuts down), and recourse is contractual (see disputing a denied payout). Spreading accounts across several firms limits what one failure costs; a trade copier does nothing for counterparty risk when every account sits at the same firm, because copying only scales the position.

How do you check a prop firm's regulatory status?

Check the legal entity, not the brand, then size what you leave with it to the answer.

1. Find the legal entity named in the account agreement and where it is incorporated.
2. If it claims US registration, search that exact entity in NFA BASIC; in the UK, search the FCA Warning List.
3. Read whether the funded account is simulated or live, in the agreement or risk disclosure.
4. Set a withdrawal threshold so your unpaid claim never exceeds what you would accept losing.

Decision rule: if you cannot name the firm's legal entity and jurisdiction, treat every dollar inside it as at risk and request a payout at the first eligible point. If a registration claim names a different entity from the one in your agreement, do not count it as protection. For the full per-firm checks, see how to verify a futures prop firm.

Go deeper

• Is Futures Prop Trading Legit? How to Verify a Firm Before You Pay
• When a Prop Firm Changes the Rules or Shuts Down Mid-Evaluation
• Is Copy Trading Legal? What Regulators Actually Say
• DXTrade vs MT5 for CFD Prop Firms in 2026: Which Wins After the MetaQuotes Crackdown?

Frequently asked questions

Sources

1. US Securities and Exchange Commission (2020), SEC Charges Day-Trading Education Firm for Unregistered Security-Based Swap Transactions
2. CFTC (copy hosted by Wolters Kluwer CCH) (2023), Release Number 8771-23: CFTC Charges "My Forex Funds" with Fraudulently Taking Over $300 Million From Customers Hoping to Become Professional Traders
3. US District Court, District of New Jersey (hosted on cftc.gov) (2025), Report and Recommendation of the Special Master, CFTC v. Traders Global Group Inc.
4. CFTC (2025), Acting Chairman Pham Statement on Court Sanctions Against CFTC
5. CFTC (2026), CFTC Seeks Public Comment on Proposed Rule Changes for Commodity Pool Operator and Commodity Trading Advisor Registration
6. National Futures Association (2026), Who Has to Register
7. Financial Conduct Authority (2025), Funded Trader
8. FSMA (Belgium) (2024), The FSMA warns consumers against shadow investment game
9. CNMV (Spain) (2019), La CNMV advierte sobre las páginas web de cuentas de trading financiadas ligadas a cursos de formación
10. PacerMonitor (2025), Commodity Futures Trading Commission v. Traders Global Group Inc. et al (1:23-cv-11808) docket