How do prop firms make money?

Updated 24 September 2026 by the Prop Firm Pal editorial team.

A retail prop firm has several sources of income, and the first is the one every firm has.

• Evaluation fees. Every attempt is paid up front. The median cheapest $100,000 evaluation across the 23 firms with full terms in our industry report is $419.
• Resets and retries. A trader who breaches can buy another attempt, often at a discount — see reset fee.
• Activation and subscription fees. Many futures firms charge monthly during the evaluation and a one-off activation fee on passing.
• Add-ons. Paid upgrades such as a higher profit split, faster payouts or no time limit.
• Trading profit. Some firms copy selected traders onto real accounts and keep the result.

Most funded accounts are simulated. FTMO, for example, states that its funded traders use a demo account with fictitious capital, and that it evaluates separately whether to execute trades for its own account. A simulated loss costs the firm nothing, and a simulated profit is paid as a reward from the firm’s revenue.

That works as long as fees from all attempts exceed payouts to the few who earn them. It is why firms keep rules that end accounts quickly, cap payouts, and review payouts for prohibited practices. It is not a scam in itself — the terms say so — but it means your payout depends on the firm’s ongoing sales and solvency, not on a pool of capital set aside for you.

A firm that finds a consistently profitable trader can copy that trader’s positions onto its own brokerage account — the “A-book” side of an A-book / B-book model — and earn real trading profit. FTMO describes monitoring funded traders and deciding whether trades will be executed for its own account. Topstep goes further and moves some traders to a Live Funded Account on real markets.

In August 2023 the CFTC sued the operator of My Forex Funds, alleging it was the counterparty to substantially all customer trades rather than routing them to third-party liquidity providers, and that customers had paid over $300 million in fees. The allegations were never proven: in May 2025 a federal judge dismissed the case with prejudice and sanctioned the CFTC for misleading the court. The case shows what a regulator scrutinised in the model — see are prop firms regulated?.

A firm that depends on fees needs steady sales to pay its winners, so its health matters as much as its rules. Check how long it has operated and whether its audience is growing or shrinking on the firm health tracker, whether it has changed rules or payout terms recently on the changes log, and whether traders report receiving payouts. Are prop firms legit? lists the checks.

A fee-funded firm balances two numbers: what it takes in from attempts, and what it pays out to funded traders. When payouts rise faster than sales, the levers it has are the rules and the prices — a tighter drawdown, a new consistency rule, a lower payout cap, a higher fee. That is why rulebooks change so often, and why a change applied to existing accounts deserves attention.

Our rule & price changes log records the changes we track, dated, so a trader can see whether a firm is tightening before buying from it.

FTMO — how an FTMO Account works technically

Topstep — how the funded program works

CFTC — complaint against My Forex Funds (2023)

Finance Magnates — CFTC case dismissed (2025)