For years, prop firms operating in the United States occupied a regulatory grey zone — not quite brokers, not quite exchanges, thriving on the technical distinction that they offer simulated trading environments rather than real market access. That ambiguity may now be narrowing. In a clear shift in industry strategy, several of the most prominent US-based prop trading firms are actively pursuing formal CFTC oversight, with Topstep and Tradeify making concrete regulatory moves that signal a new chapter for the sector.
Tradeify and Topstep Make Concrete Moves Toward CFTC Status
The most visible recent development came from Tradeify, which launched a separate introducing brokerage unit called Slay Markets and locked in NinjaTrader as its sole clearing firm. The move represents a deliberate step beyond the prop challenge model and into regulated brokerage territory, giving the firm a licensed presence in the US market with a defined operational structure.
Topstep followed a different path but arrived at a similar destination. The Chicago-based futures prop firm recently registered with the National Futures Association (NFA) as a Swap Firm and received approval to operate as a Commodity Trading Advisor (CTA). These two designations put Topstep firmly within the CFTC’s regulatory perimeter, making it one of the few prop trading operators in the country to carry that standing voluntarily.
MyFundedFutures has also signalled its direction, with leadership indicating the firm is working toward becoming a “fully licensed IB.” While that registration has not yet been confirmed, the public statement aligns with a broader trend emerging across the US futures prop sector.
Why the Regulatory Grey Zone Became Untenable
The shift toward CFTC registration did not happen in a vacuum. Two separate shocks reshaped how US-focused prop firms thought about operating outside a licensed framework.
The first was the MetaQuotes crackdown in early 2024, when the platform provider began blocking prop firms from onboarding US-based traders. Several platforms were forced to pivot overnight to alternative trading infrastructure, exposing the fragility of building a US business on unregulated ground.
The second, and more structurally alarming, event was the CFTC’s enforcement action against My Forex Funds. That case demonstrated that the regulator was willing to pursue prop firms operating in the US, even when those firms argued their services were purely simulated. The industry responded quickly, with many operators revising their website language to emphasise the educational or simulated nature of their programs — but the legal exposure remained unresolved.
Against that backdrop, the appointment of DJ Hennes as the new Director of the CFTC’s Market Participants Division adds another dimension of uncertainty. Hennes will oversee all CFTC-regulated intermediaries, and while he has not yet publicly addressed the prop trading sector, his focus on crypto and prediction markets signals a regulator actively engaging with emerging financial structures.
Understanding the IB Model and What It Actually Means
The regulatory structure most US prop firms are gravitating toward is the Introducing Broker model. An IB in the US can accept and pass on orders for futures contracts, forex, commodity options, or swaps — but crucially, it does not hold customer funds. It acts as a conduit between traders and a Futures Commission Merchant (FCM), which handles the actual execution and clearing.
This distinction matters. An FCM carries direct financial exposure, holds margin, and is subject to strict capital adequacy standards. An IB operates with significantly lower regulatory overhead while still gaining NFA registration and formal legal standing. There are currently 885 registered IBs in the US, making it the most accessible entry point into the regulated derivatives ecosystem.
For prop firms, the IB structure offers a credible compliance posture without requiring the capital infrastructure of a full FCM. It also opens a potential revenue stream: IBs earn commission rebates from FCMs on a per-lot or volume basis, meaning a firm like Tradeify or Topstep could generate income from referring their funded trader base to their own regulated brokerage arm.
FTMO Represents the Other End of the Spectrum
While the IB model represents the low-barrier entry point, FTMO chose a more ambitious route. The Czech-based firm completed its acquisition of OANDA — one of only four Retail Foreign Exchange Dealers registered with the NFA in the US — last December. That acquisition gave FTMO direct access to the US retail forex market through a fully licensed platform, something no other prop firm has yet replicated.
The OANDA deal sets a benchmark for what full-scale US market integration looks like for a prop trading operator. It also illustrates how different the risk and capital requirements are at that level versus the IB registration path most other firms are pursuing.
What This Means for the Broader Prop Industry
The regulatory shift underway among US-focused prop firms carries implications that reach well beyond the companies directly involved. As Topstep, Tradeify, and others build licensed infrastructure, the implicit standard for what a credible US prop firm looks like is changing. Firms that remain outside any regulatory framework may find it increasingly difficult to attract institutional clearing partners, gain access to preferred platforms, or build the kind of trader trust that sustains long-term growth.
There is also a competitive dynamic worth watching. Regulated status does not just provide legal cover — it can serve as a marketing signal in a market where trader trust has been eroded by a string of firm closures, payout disputes, and regulatory actions over the past two years. A prop firm with NFA registration can credibly point to an external oversight body, which is something an unregistered competitor cannot match.
For traders, the trend is broadly positive. Regulated counterparties are subject to financial reporting requirements, operational standards, and dispute resolution mechanisms that simply do not exist in the unregistered prop trading space. Whether or not traders actively consider a firm’s regulatory status today, the infrastructure being built now will shape the options available to them going forward.
The pace of this transition will ultimately depend on how the CFTC responds. If the regulator clarifies the legal standing of unregistered prop firms — either by formally approving the model or restricting it — the current voluntary wave of registrations could become a mandatory baseline. Until then, firms like Topstep and Tradeify are making a calculated bet that regulated status is worth the cost and complexity, and that the US market is large enough to justify the investment.
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Source: Finance Magnates
