Is Prop Trading Getting Regulated? What Traders Need to Know in 2026
The CFTC, FCA, and ASIC are all circling the prop trading industry. Between 2023 and 2024, an estimated 80–100 firms closed under the pressure. Here is what the coming regulatory shift means for funded traders and which types of firms are safest.
The retail prop trading industry grew from a niche corner of online trading into a $12 billion market between 2020 and 2025. Search volume for prop trading increased by more than 5,000% in that period. That kind of growth attracts regulatory attention — and in 2026, that attention has arrived.
The CFTC, FCA, ASIC, and a growing list of other regulators are actively examining the prop trading business model. Understanding what they are looking at — and what that means for your funded account — is increasingly important for traders choosing where to put their challenge fee.
Why Prop Firms Have Been Largely Unregulated
The core question regulators have been wrestling with is whether retail prop firms are operating as financial services firms — and therefore require licensing — or as something else entirely.
Most prop firms have argued that they are not offering financial products to retail clients. Instead, they describe their evaluation programmes as skill assessments: traders pay a fee, demonstrate trading skill, and if they pass, the firm allocates them capital to trade on the firm's behalf. Under this framing, the trader is an employee or contractor, not a retail investor.
This argument has held up in many jurisdictions — but regulators are increasingly unconvinced. The CFTC has signalled that it may classify evaluation-based futures prop firms as Commodity Trading Advisors, which would require registration, capital adequacy demonstrations, and formal risk disclosures. The FCA in the UK has issued guidance questioning whether some prop firm structures amount to unlicensed financial services.
What Has Already Changed
The regulatory pressure has already caused significant consolidation. Between 2023 and 2024, an estimated 80 to 100 prop firms closed globally. Many of these closures were directly connected to:
The firms that survived this period are, almost by definition, the ones with more robust infrastructure, stronger capitalisation, and cleaner operating practices.
CFD vs Futures: Different Regulatory Profiles
Not all prop firms face the same regulatory risk. The type of instrument matters significantly.
CFD-based prop firms (FTMO, FundedNext, OneFunded, The 5%ers) allow trading of forex pairs, indices, commodities, and sometimes crypto via contracts for difference. CFDs are prohibited for retail traders in the United States under CFTC and SEC rules — a prohibition in place since 2010. This means CFD prop firms structurally cannot serve US-based traders, and face greater scrutiny in jurisdictions where retail CFD access is restricted.
Futures-based prop firms (Apex, Topstep) operate in a more established regulatory framework. US futures trading is regulated by the CFTC and NFA, and futures prop firms can structure their operations around existing licensed infrastructure — typically by partnering with licensed FCMs (Futures Commission Merchants). This gives futures prop firms a clearer regulatory path than CFD-based counterparts.
The move toward futures prop trading that has been visible since 2023 is partly a reaction to this regulatory dynamic.
What Regulators Are Expected to Require
Based on public statements from the CFTC, FCA, and ASIC, the expected regulatory requirements for prop firms include:
These requirements are not finalised in any single jurisdiction. 2026 appears to be the year in which several of these conversations move from consultation to enforcement.
What This Means for Traders
In the short term, regulatory pressure is likely to mean slightly higher costs (compliance costs are passed to traders through fee structures), fewer available firms, and stricter onboarding processes.
In the medium term, it is net positive. Regulation creates accountability. A licensed prop firm cannot disappear overnight without triggering regulatory consequences. A firm required to disclose its actual pass rates and payout history cannot make marketing claims that contradict the data.
The clearest practical advice for traders right now:
Choose firms that already behave as if they are regulated. Transparent payout disclosures, verified review programmes, clearly documented rules, and multi-year operating history are all proxies for regulatory readiness. A firm that discloses its trust score methodology and publishes verified payout data is operating at a standard that regulatory compliance will only reinforce.
Firms that rely on opacity — vague rules, undisclosed consistency requirements, or hard-to-find payout terms — are the firms most likely to struggle as regulatory clarity arrives.
The Industry in 2026
The prop trading industry at $12 billion is already large enough to be important to regulators. Projections suggest it may reach $20 billion by the end of the decade. At that scale, the current grey-area operating environment is unlikely to persist.
The firms building for the long term — FTMO's acquisition of OANDA being the clearest example — are those combining prop trading models with regulated brokerage infrastructure. The firms taking the opposite approach are taking an increasing amount of regulatory risk.
For traders, the framework is simple: firms with longer track records, stronger review profiles, and transparent operating practices are the safest bets regardless of what regulatory changes arrive. PropRadar's trust score was built around exactly these signals — rule stability, payout reliability, and verified review volume — because they were the right signals before regulation, and they will remain the right signals after it.