If you were waiting for Europe to regulate prop firms, don't hold your breath. In comments published by Finance Magnates on June 26, 2026 and reported by Cyprus Mail on July 2, a senior figure in the EU's securities supervisory system said retail prop trading is not on the agenda.
What was said
Dr George Theocharides chairs Cyprus' regulator CySEC and also chairs ESMA's Risk Standing Committee. He told Finance Magnates: "To the best of my knowledge, ESMA is not currently engaged in any substantive discussions regarding retail prop trading."
He added: "While the topic may be monitored as part of broader market developments, it does not appear to rank among the Authority's immediate priorities, given the relatively limited size of the sector." ESMA itself declined to comment.
That is a change in tone. Finance Magnates recalls that ESMA held its first oversight discussions about the sector two years earlier, and many in the market expected retail prop trading to be pulled into MiFID II. A year ago, Theocharides had said prop trading was "on the radar." CySEC republished the Finance Magnates article on its own site.
It is worth being precise. Theocharides was giving his own view as a committee chair, not announcing an ESMA board decision.
Meanwhile, in the US
Finance Magnates contrasts Europe's stance with the US, where "a crackdown may be approaching." It reports that large American prop firms are beginning to register with the CFTC. It cites Topstep, now a registered Introducing Broker that sends client orders to a Futures Commission Merchant (Plus500) for execution and clearing. The outlet links that shift partly to the lasting effect of the CFTC's 2023 action against My Forex Funds.
Why the grey zone persists
According to Finance Magnates, prop firms present themselves as simulation or education platforms, not financial institutions. But the model is changing:
- Prop firms and brokers are merging. FTMO bought OANDA. The Trading Pit launched TTP Markets. Axi launched Axi Select. ATFX launched and then paused ATFunded.
- Prop firms act as funnels. FundingPips lets traders move rewards to its regulated broker, Tradin, with a 30% trading bonus, according to the report. ATFX said it converted over 10% of its South American prop traders into brokerage clients.
- Marketing stunts. The article describes Swiss-based Crypto Fund Trader posting about an "unauthorised transfer of funds" and an office break-in in June 2026, then revealing it was a staged stunt to promote a new account type. Finance Magnates argues MiFID II marketing rules would likely flag that kind of tactic.
The piece asks a pointed question. Can a prop firm still call itself an educational entity if it survives by acting, in effect, as an Introducing Broker for its own regulated brokerage?
Both sides
The case for waiting: Retail prop traders generally risk a fixed fee, not leveraged personal capital. In a separate Finance Magnates interview, Hola Prime's CEO argued prop "can be a safer format for retail participants compared to CFDs." Regulators have limited resources, and the CFTC's defeat in the MFF case shows how costly a badly built enforcement action can be.
The case against: Finance Magnates notes that many Reddit novices seem to believe they are managing real money. Beginners who don't realise they are in a simulation can't judge the risk that the firm won't be able to pay. Italy's Consob warned in 2024 that prop sites promote exercises that "simulate online trading in a type of finance video game."
Our take
Our take: "Too small to prioritise" is a reasonable call on systemic risk and a weak one on consumer protection. Nobody thinks prop firms threaten the stability of the financial system. The issue is millions of retail buyers paying for a product whose odds are rarely disclosed. Europe's silence means the rulebook for EU traders is, for now, whatever each firm's T&Cs say. The uncomfortable question: Finance Magnates suggests it may take another MFF-sized scandal to get Paris to act. Who pays for that scandal?
What traders can do
- Don't assume an EU or UK address means regulatory protection for a prop challenge. It usually doesn't.
- Read the "simulated" disclosures carefully. If the funded account is simulated, your payout depends on the firm's balance sheet.
- Be skeptical of dramatic marketing, including crises that later turn out to be promotions.
Key takeaways
- CySEC chair and ESMA Risk Standing Committee chair George Theocharides said ESMA is not in "substantive discussions" on retail prop trading (published June 26, 2026).
- He said the sector is not an immediate priority "given the relatively limited size of the sector."
- Finance Magnates reports large US prop firms are moving to register with the CFTC as Introducing Brokers.
- Prop firms and brokers are merging, which makes the "education/simulation" label harder to defend.
- For EU traders, the firm's T&Cs remain the main rulebook.
Put the research to work on your Desk
Explore the tools behind the research, compare the available access, or open your Desk if you already have an account.
FAQ
Is ESMA regulating prop firms?
According to CySEC chairman George Theocharides, who also chairs ESMA's Risk Standing Committee, ESMA is not in substantive discussions about retail prop trading, and it is not an immediate priority. ESMA declined to comment.
Are US prop firms registering with the CFTC?
Finance Magnates reports that some large US prop firms are registering as Introducing Brokers. It cites Topstep, which uses Plus500 as its Futures Commission Merchant.
Why is prop trading in a regulatory grey area?
Many firms describe themselves as simulation or education platforms rather than financial institutions. That keeps them outside broker rules, even as more of them link up with regulated brokerages.
Loomi.Ai provides educational market research, not financial advice. Trading futures and options involves substantial risk of loss, and backtested results are historical and do not guarantee future returns.
Sources
- Prop Trading Slips Down Paris' Agenda as the US Steps Up, Finance Magnates
- Retail prop trading not an ESMA priority, says CySEC chairman, Cyprus Mail
- CySEC says retail prop trading is no longer an immediate ESMA priority, Cyprus Inform
- Prop Trading Slips Down Paris' Agenda as the US Steps Up (republished), CySEC