Last updated: 2 October 2026 Are prop firms legal in the US? There’s no single yes or no in federal law, because no federal law addresses “prop firms” as such. This explainer sets out what the primary sources say: the Commodity Exchange Act, CFTC regulations, the full CFTC v. My Forex Funds record and the firms’ own wording. We quote each source and link to it, and we checked every quote word for word.
General information, not legal advice. This page summarizes public documents. It doesn’t tell you whether any firm, product or trade is lawful, and it doesn’t cover state law, tax or law outside the US. For advice on your situation, talk to a lawyer licensed in your state.
No statute or CFTC rule we read uses the words “prop firm” or “funded trader”. What US federal law regulates is the underlying activity: being the counterparty to leveraged retail forex or retail commodity trades, brokering futures, and advertising simulated results. Which rules apply depends on what a firm actually does.
All 9 firms we checked say their evaluation accounts are simulated. FTMO calls them “demo accounts with fictitious funds”. Apex says they “do not involve real capital or live market execution”. If no real trade happens, the firm isn’t a counterparty to a real retail trade. That is the core of the industry’s position, in the firms’ own words.
The CFTC tested that line once, against My Forex Funds, and the case ended without a ruling on it. The CFTC alleged the firm was really the counterparty to its customers’ trades, and in November 2023 won a preliminary injunction (granted in part). On 13 May 2025 the court dismissed the case with prejudice as a sanction for the CFTC’s own conduct, which the Special Master called “willful and undertaken in bad faith”. The legal question was never decided on the merits.
The registration line for retail customers is clear. Anyone who is, or offers to be, the counterparty to a retail forex trade must register as a retail foreign exchange dealer (17 CFR 5.3(a)(6)(i)). An individual counts as “retail” unless they have more than $10 million invested on a discretionary basis (7 U.S.C. § 1a(18)). Exchange-traded futures are carved out of the retail forex definition (17 CFR 5.1(m)).
Live accounts are a different setup. Topstep and Tradeify name introducing brokers that are NFA members. Take Profit Trader says its live accounts run through Tradovate. Apex Trader Funding says live traders use “capital provided by Apex”.
What federal law covers
| Source | What it covers | Exact wording (excerpt) |
|---|---|---|
| 7 U.S.C. § 2(c)(2)(B)(i) | Retail forex: CFTC jurisdiction | “This chapter applies to, and the Commission shall have jurisdiction over, an agreement, contract, or transaction in foreign currency that” |
| 7 U.S.C. § 2(c)(2)(D)(i) | Retail commodity transactions (leveraged, margined or financed) | “entered into, or offered (even if not entered into), on a leveraged or margined basis, or financed by the offeror, the counterparty, or a person acting in concert with the offeror or counterparty on a similar basis.” |
| 7 U.S.C. § 1a(18)(A)(xi) | Eligible contract participant (individuals) | “an individual who has amounts invested on a discretionary basis, the aggregate of which is in excess of— (I) $10,000,000; or (II) $5,000,000 and who enters into the agreement, contract, or transaction in order to manage the risk” |
| 17 CFR 5.1(m) | Retail forex transaction: definition and exchange-traded futures carve-out | “A retail forex transaction does not include an account, agreement, contract or transaction in foreign currency that is a contract of sale of a commodity for future delivery (or an option thereon) that is executed, traded on or otherwise subject to the rules of a contract market designated pursuant to section 5(a) of the Act.” |
| 17 CFR 5.1(h)(1) | Retail foreign exchange dealer (RFED): definition | “Retail foreign exchange dealer means any person that is, or that offers to be, the counterparty to a retail forex transaction” |
| 17 CFR 5.3(a)(6)(i) | RFED registration requirement | “Any retail foreign exchange dealer, as defined in § 5.1(h)(1) of this part is required to register as a retail foreign exchange dealer;” |
| 17 CFR 4.41(b)(1) | Simulated performance disclaimer (CPOs and CTAs) | “These results are based on simulated or hypothetical performance results that have certain inherent limitations.” |
Why this matters for prop firms: a retail customer is anyone who isn’t an “eligible contract participant”, which for most individuals means having $10 million or less invested on a discretionary basis. If a firm is the counterparty to that customer’s leveraged forex trades, it is acting as a retail foreign exchange dealer and has to register. A firm whose customers trade only in a simulator, with no real transaction behind it, argues that none of this applies. The rule on simulated-performance disclaimers (17 CFR 4.41) covers commodity pool operators and trading advisors. Several firms reproduce its wording, which doesn’t mean they are registered.
The one big test case: CFTC v. My Forex Funds
My Forex Funds (Traders Global Group Inc.) is unrelated to MyFundedFutures. Everything below comes from the court record and CFTC filings. The complaint’s claims are allegations, and the case ended without any ruling on whether they were true.
| Date | Event | What the record says | Source |
|---|---|---|---|
| 2023-08-28 | CFTC files complaint (D.N.J. 1:23-cv-11808) | Alleges Traders Global (My Forex Funds) was “the counterparty to substantially all customer trades” and charges fraud, acting as an unregistered RFED and off-exchange retail commodity transactions. Allegations, not findings. | Document |
| 2023-08-28 | What the complaint says customers paid | The complaint alleges more than 135,000 customers signed up and paid at least $310 million in fees. | Document |
| 2023-08-28 | Firm's own claim, as quoted by the CFTC | The complaint quotes the firm's website calling itself a “proprietary firm” that does not “require regulation.” | Document |
| 2023-08-29 | Ex parte restraining order | Court freezes assets and appoints a temporary receiver on the CFTC's prima facie showing. | Document |
| 2023-11-14 | Preliminary injunction opinion (ECF 134) | Court finds a prima facie showing on each alleged violation and enjoins acting as a counterparty in retail forex or retail commodity transactions. It also says the CFTC's handling of an investigator's error about a $31.55 million transfer is “troubling at best.” (Quoted in the Special Master's report.) | Document |
| 2025-04-30 | Special Master's report on sanctions (filed publicly as ECF 258 on 2025-05-13) | Finds the CFTC's conduct “willful and undertaken in bad faith” and recommends dismissal with prejudice. | Document |
| 2025-05-13 | Order dismissing the case (ECF 260) | Court adopts the report, grants the sanctions motion, dismisses the complaint with prejudice, and denies a separate motion to dismiss as moot. | Document |
The CFTC’s announcement is press release 8771-23. What the dismissal means: it was a sanction against the regulator, not a finding that the firm’s model was lawful or unlawful. The court never ruled on whether simulated-account programs are retail forex transactions. A separate motion to dismiss was denied as moot. For other prop firm cases, see our lawsuits tracker.
What the firms say about their own accounts
| Firm | Firm’s wording (evaluation / funded stage) | Source |
|---|---|---|
| FTMO | “Please note that all accounts we provide to our clients are demo accounts with fictitious funds and any trading is in a simulated environment only.” | Firm page |
| Topstep | “Simulated trading program services , comprising the Trading Combine, and the Express Funded Account, and Topstep Labs experiments are operated by TopstepTrader, LLC” | Firm page |
| Apex Trader Funding | “All accounts operate in a simulated environment using virtual funds and do not involve real capital or live market execution.” | Firm page |
| MyFundedFutures | “All trades are executed on a demo basis and do not involve real capital.” | Firm page |
| Take Profit Trader | “Yes, all PRO accounts are simulated (SIM).” | Firm page |
| Tradeify | “You're trading on simulated capital, so the money in your bank account is never on the line.” | Firm page |
| FundedNext | “Trading activities on this platform are executed solely by FundedNext Ltd. using virtual funds in a simulated environment and do not involve real financial risk or trading with real financial instruments.” | Firm page |
| The5ers | “All evaluation activities conducted through the Company Hub operate exclusively within a simulated environment.” | Firm page |
| Goat Funded Trader | “All purchase fees paid to the Company are strictly for participation in evaluation challenges, educational assessments, and access to the simulated trading platform.” | Firm page |
And when trading goes live
| Firm | Firm’s wording (live stage) | Source |
|---|---|---|
| Topstep | “Introducing brokerage services are offered through Topstep Brokerage LLC (“Topstep Brokerage”), a registered introducing broker and a member of the National Futures Association.” | Firm page |
| Tradeify | “Tradeify Brokerage LLC d/b/a Slay Markets is a CFTC-registered introducing broker guaranteed by NinjaTrader Clearing, LLC and an NFA Member.” | Firm page |
| Take Profit Trader | “Take Profit uses Tradovate as its regulated broker for live (PRO+) accounts.” | Firm page |
| Apex Trader Funding | “Users who are invited to contract with Apex as an “Authorized Trader” participate in live market trading using capital provided by Apex Trader Funding” | Firm page |
| MyFundedFutures | “Customers who meet the required performance criteria may, at our sole discretion, receive an invitation to access live capital trading through one of our affiliated companies” | Firm page |
Introducing brokers and futures commission merchants are registered with the CFTC through the NFA. You can look any of them up in NFA BASIC (nfa.futures.org/BasicNet). The registrations above are as the firms state them, and we haven’t checked them in BASIC.
Questions worth asking any firm
- Is my account simulated, and does the firm say so in writing? If profits are simulated, where do payouts come from? (Take Profit Trader, for example, says they come from “a combination of collected test fees, tech fees, and shared PRO+ profits”.)
- If trades are described as real, who is the counterparty, and is that company registered? Check it in NFA BASIC.
- Which company am I contracting with, and where is it based? See Who Owns Your Prop Firm?
- Does the firm accept US residents for the products I want? See the US Availability Tracker.
- Has a regulator published a warning about it? See regulator warnings.
Methodology
On 2 October 2026 we downloaded the statute text from Cornell LII (7 U.S.C. §§ 1a, 2) and the regulations from eCFR (17 CFR 4.41, 5.1, 5.3). The complaint, restraining order and Special Master’s report come from cftc.gov, and the dismissal order (ECF 260) from CourtListener’s RECAP archive. Firm wording comes from homepages saved 2 October 2026. Apex blocks automated fetches, so we read its terms of use through a web reader the same day. We checked all 29 quotes against our saved copies, word for word. Where we quote the preliminary injunction opinion (ECF 134), the quotes come via the Special Master’s report, because we don’t hold the opinion itself.
Not covered: state law, including state gambling, consumer protection and money-transmission rules; the SEC (for securities); tax; and any law outside the US. We didn’t find any CFTC advisory specific to funded-trader programs in our searches. That isn’t proof that none exists.
How to cite this
Prop Data Lab, “Are Prop Firms Legal in the US? What the Primary Sources Say”, updated 2 October 2026, https://propdatalab.com/are-prop-firms-legal-in-the-us/
The table and the CSV are free to reuse under CC BY 4.0: copy, chart or republish them, commercial use included, as long as you link back to this page. Please keep the “general information, not legal advice” framing when quoting.
Common questions
Are prop firms legal in the US?
No federal statute or CFTC rule names "prop firms". Legality turns on what a firm does. Being the counterparty to leveraged retail forex or retail commodity trades requires CFTC registration, and brokering futures requires registration as well. Most firms say their evaluation and funded accounts are simulated, with no real trades. This is general information, not legal advice.
What happened in the CFTC case against My Forex Funds?
The CFTC sued Traders Global Group (My Forex Funds) in August 2023. It alleged the firm was the counterparty to substantially all customer trades and acted as an unregistered retail foreign exchange dealer. On 13 May 2025 the court dismissed the complaint with prejudice as a sanction for the CFTC's conduct, so the allegations were never decided on the merits.
Are prop firm accounts real money?
The nine firms we checked (FTMO, Topstep, Apex, MyFundedFutures, Take Profit Trader, Tradeify, FundedNext, The5ers and Goat Funded Trader) say their evaluation accounts are simulated. Some offer a separate live stage by invitation, through a registered broker or the firm's own capital.
Is MyFundedFutures the same as My Forex Funds?
No. My Forex Funds was the trading name of Traders Global Group Inc., the defendant in the CFTC case. MyFundedFutures (MyFunded Futures, LLC) is a separate futures prop firm.