The prop firm evaluates you in a simulation, and it says so itself

We have five articles on passing a funded challenge: position sizing, daily and maximum drawdown, how to pass it without blowing the account, profit splits and the psychology of trading someone else's capital.

All of that still stands. This article does not contradict them: it explains what the board is made of, which is a different question from how to play well on it.

And the answer is not hidden anywhere exotic. It is on the firms' own front pages.

What the firms say about their own product

FTMO, one of the largest in the sector, writes it on its home page and repeats it, in these words, in its terms and conditions:

"Please note that all accounts we provide to our clients are demo accounts with fictitious funds and any trading is in a simulated environment only."

There is nothing to interpret, and it is not buried in small print: it is published in plain sight. The accounts are demo. The funds are fictitious. The environment is simulated. That remains true after you pass the challenge.

It is worth bounding how far that sentence reaches. It is FTMO's, it is a forex and CFD firm, and it describes its own product. In futures there are firms that do move the trader to a genuinely live account: Topstep describes its Trading Combine as "realistic simulations of trading under actual market conditions" and keeps the live account for those who clear that stage. Its own page publishes how many get there: 0.71% of participants with an Express Funded Account were called up to a Live Funded Account.

So the rule is not "all prop firms are simulated". It is more useful and more uncomfortable than that: in forex and CFDs the account is usually simulated from start to finish, and where a live account does exist, reaching it is statistically rare. What a funded account actually is, and what each kind of firm says about it, is developed in what a funded trading account is.

Which forces two widely held ideas to be reordered.

Two ideas to reorder

You are not trading the firm's money. You are trading a demo account whose result the firm uses to calculate a payment. What you receive is real; the trading that generates it is not. Profit splits describes correctly how that payment is calculated, and it is still accurate: what changes is where the number being split comes from.

Your trade does not reach the market. That is the underlying reason a prop firm can scale to tens of thousands of simultaneous clients without managing a real position for each one.

It also draws a distinction worth keeping straight. A broker that keeps the risk on your position at least gives you access to a price other people are paying at that moment. Here there is not even that, because there is no market contract at all.

Where does the money come from?

A business is understood by looking at its revenue, not at its story.

The first two lines are charged up front and to everyone. The third is paid to a minority. That is why the fee is the predictable revenue of the business and the split is the cost.

Worth saying without drama: that does not make the model a fraud. A gym also charges every member while only a few turn up daily, and nobody thinks the gym is deceiving anyone. But it does explain why the challenge rules — the daily drawdown, the target, the deadlines — are calibrated where they are, and why the article on why almost nobody passes the challenge describes something structural rather than bad luck.

What does this change in practice?

Three concrete things, and none of them is a reason not to do it.

Who you complain to. There is no securities account in your name, there are no financial instruments, and in most jurisdictions there is no investment services licence behind it. Your relationship is contractual with a company, not that of a client with a supervised entity. What that means is in why a regulated broker matters.

What the result proves. A passed funded account proves you followed a set of risk rules under pressure, which is a real and transferable skill. What it does not prove on its own is live-market performance, because simulated execution does not include the slippage and rejections that do show up in a real account.

What you compare. The cost of the challenge is not compared against the advertised capital, but against the expected payment: the fee, multiplied by the attempts you are realistically going to make, against what you can reasonably expect to be paid.

What happened when a regulator stepped in

There is a story here that gets told badly in both directions, and it is worth telling whole.

In August 2023 the US Commodity Futures Trading Commission (CFTC) sued Traders Global Group, known as My Forex Funds, alleging among other things that the company was the counterparty to substantially all of its customers' trades despite telling them they were trading against third-party liquidity providers.

Plenty of people cited that suit as the definitive proof against the sector. It was not.

In May 2025 the case was dismissed with prejudice by a New Jersey federal court, which also ordered the CFTC to pay costs. A special master concluded that the agency had made "false representations" to the court and acted "willfully and in bad faith on several occasions" by presenting as suspicious personal transfers what were in fact tax payments to the Canadian revenue agency.

The honest conclusion is uncomfortable for everyone. There was no ruling on the merits: the case collapsed over the regulator's conduct of the litigation, not because a court validated the model. Unlike binary options, where there are express bans to cite from the European Securities and Markets Authority (ESMA), the UK's Financial Conduct Authority (FCA) and Spain's Comisión Nacional del Mercado de Valores (CNMV), here there is no ruling to cite in either direction. The sector operates in a space that has not been decided yet.

What this article does not tell you

It does not say prop firms are a fraud. The model is disclosed on their own websites, the fees are public, and there are firms that have been paying what they owe for years.

It does not say passing a challenge is pointless. It is not: it is a risk discipline measured by a third party under hard rules, and very few people volunteer for that. Our five articles on how to pass one remain valid word for word.

It does not rate specific firms, compare their terms, or claim nobody gets paid. People do get paid; the discussion is about what you are buying when you pay the fee.

And it does not say simulated means rigged. A simulation can be faithful, and we have no evidence these are not. What is true is that there is no public price to check it against.

What it gives you is the right question before paying for a challenge: not "how much capital do I get?", but "what does the attempt cost, how many attempts am I really going to make, and who am I signing with?".