How prop firms operate legally:
The legality of prop trading firms is based on several fundamental principles that apply across different jurisdictions. Understanding these essential elements helps traders recognize legitimate prop firms regardless of their location.
Modern prop firms like FR-propfutures operate on a legally sound business model with these key characteristics:
Clear structure based on services
Companies offer a defined assessment service for transparent fees
Traders understand that they are buying an opportunity to demonstrate their skills
All terms, conditions and requirements are explicitly stated from the outset
The relationship is structured as a performance-based provider arrangement
Companies trade exclusively with their own capital, not with client deposits
Funded accounts remain the property of the company at all times
Traders are compensated for their skills and performance, not for investment returns.
There is no pooling of investor funds or promises of investment returns.
Everything you need to know about Propfirm
Contractual clarity:
Transparent agreements define the relationship between the company and the trader
Clear profit sharing conditions with specific calculation methods
Well-defined risk parameters and trading rules
Explicit conditions for termination or continuation of the account
These fundamental elements create a legally sound structure that differentiates new prop firms from regulated activities such as brokerage, fund management or investment advice.
Transparency and protection of traders
We ensure the protection of our traders' interests by implementing the following elements:
Transparent evaluation criteria, based on clear, objective and measurable standards
Simple, clear and duly documented profit-sharing agreements
Fair and consistent application of the rules for all traders
Real-time performance monitoring using precise indicators
Reliable payment systems with predictable processing times
Our prop trading program offers access to significant capital while complying with current regulatory requirements. We create a safe and professional environment, allowing traders to focus fully on their performance without worrying about legal issues.
Are prop firms legitimate trading opportunities?
Yes, legitimate prop firms offer genuine opportunities for skilled traders to access significant capital without risking their own funds. Legitimate prop trading involves actual market transactions using the firm's capital, with traders receiving a share of the profits generated.
Do I have to pay taxes on prop firm profits?
Generally, yes. In most jurisdictions, income earned from trading with a prop firm is taxable. The specific tax treatment depends on your location and the structure of your relationship with the prop firm (contractor, employee, etc.). We recommend consulting a tax professional familiar with trading income in your jurisdiction.
Can prop firms legally operate without a license?
In many jurisdictions, prop firms that trade exclusively with their own capital and do not accept client deposits can operate without the same licenses required for brokers or investment advisors. However, they must still comply with general business regulations, tax laws, and trading rules.
Are online prop firms legal compared to traditional ones?
Many online prop firms operate legally using valuation-based models rather than the traditional employer-trader relationship. Legality depends on their specific structure, how they manage fees and capital, and their compliance with applicable regulations.