# Do you need a licence to start a prop firm? (2026)

> Do you need a licence to start a prop firm in 2026? How simulated evaluation firms differ from brokers, what the rules turn on, and how founders launch legally.

Source: https://www.propexecutor.com/blog/do-you-need-a-license-to-start-a-prop-firm
Published: 2026-09-30
Updated: 2026-09-30
Publisher: PropExecutor

## Frequently asked questions

### Do you need a licence to start a prop firm?

It depends on the model. A firm that sells simulated evaluations and funds passed traders on simulated accounts is usually running a software-and-services business rather than a regulated brokerage, and many operate without a brokerage licence. A firm that takes client deposits and routes real orders to the market is a different animal and typically needs regulatory authorisation. Rules vary by country, so take local legal advice before you launch.

### What makes a prop firm need a licence?

The main trigger is handling real client money and real market orders. When a firm holds client funds, executes trades on a live market on their behalf, or offers what a regulator treats as an investment service, licensing usually applies. Selling a simulated evaluation with a payout for passing, on simulated accounts, generally sits outside that, but the classification is set by your local regulator, not by the platform.

### Is running a simulated prop firm legal?

In most places, selling access to a simulated trading challenge and paying a reward for passing is a normal commercial activity. The key facts regulators look at are whether real client money is at risk and whether real orders hit the market. Keeping evaluations simulated is what keeps most firms clear of brokerage licensing — but you should still confirm the position where you operate and register a company properly.

### Does PropExecutor require me to be licensed?

PropExecutor runs simulated evaluation accounts rather than routing real client orders, which is what keeps most operators clear of brokerage licensing. It does not make you a broker. You still register your business and take local legal advice, but you are not taking on the full broker-licence and client-money obligations that a real-capital model brings.

### Do I need a licence to start a prop firm in the US?

The US is the strictest major market, and off-exchange retail trading draws scrutiny from the CFTC and SEC. Many prop firms restrict or exclude US customers for exactly this reason. If you plan to serve US traders, take specialist US legal advice first; many founders launch elsewhere or limit their audience to stay clear of US registration questions.

### What about a prop firm in the UK, EU, UAE or India?

Each has its own framework. The UK (FCA) and EU (MiFID) focus on whether you provide a regulated investment service; the UAE has become a popular hub for new firms; India treats the payment and company-registration side seriously. In all of them the simulated-evaluation model is generally lighter-touch than a real-brokerage model, but you must confirm locally — this article is general information, not legal advice.

### Can I avoid licensing entirely by staying simulated?

Staying simulated removes the biggest trigger — real client money and real market execution — which is why most new firms use it. It does not remove ordinary obligations: registering a company, paying tax, honouring your terms, and following consumer and advertising rules. Think of it as running a legitimate software business, not as being exempt from all rules.

### Do I need to hold trader capital to start?

No. Most firms fund passed traders out of evaluation revenue on simulated accounts and manage risk so payouts stay a fraction of fees collected. You are not required to put up a large balance or hold client deposits, which is part of what keeps the simulated model outside brokerage licensing.

### What legal steps should I take before launching?

Register a company in a suitable jurisdiction, take local legal advice on how the simulated-evaluation model is classified there, write clear terms and a refund/payout policy, set up compliant payment processing, and decide which countries you will and will not serve. The platform is the easy part; the company and compliance setup is where to spend your care.

### How much does it cost to start once the legal side is handled?

The platform can be as little as $129 once with PropExecutor — no setup fee, no monthly licence — which includes the branded terminal, the rule engine and a dashboard in every account. Your other costs are company registration, legal advice, payment processing and marketing, which vary by country.

The single question that stops more prop-firm founders than any other is not "what does it cost" or "which platform" — it is "am I even allowed to do this?" It is a fair question, and the honest answer is: it depends entirely on the model you run. This article lays out where the line sits, in plain language. It is general information, not legal advice — take local advice before you launch.

## Two very different businesses wear the same name

"Prop firm" covers two models that regulators treat very differently.

The first is the **real-capital brokerage model**: the firm takes real money, routes real orders to a live market, and manages client funds. That is a regulated investment business almost everywhere, and it typically needs authorisation, capital, and client-money controls.

The second is the **simulated evaluation model**: the firm sells access to a trading challenge on simulated accounts, and pays a reward to traders who pass and keep performing — all on simulated execution, with no client deposits routed to a real market. That is usually a software-and-services business, and it is the model most new firms launch on.

Almost everything about "do I need a licence" turns on which of these you are.

## What actually triggers a licence

Regulators generally look at a short list of facts:

- **Is real client money held or at risk?** Holding deposits and trading them is the classic trigger.
- **Do real orders hit a real market on a client's behalf?** Executing live trades for others is a regulated activity.
- **Are you offering what counts locally as an investment service or advice?** Some jurisdictions define this broadly.

A simulated evaluation, sold as a product, on simulated accounts, generally does not tick these boxes — which is why the model exists in the shape it does. But the classification is made by your local regulator, on your specific setup, not by a blog and not by your platform.

## Why the simulated model keeps most firms clear

On PropExecutor, accounts are **simulated evaluation accounts**. Your traders get a full, familiar terminal and a real-time dashboard, and orders fill against live cTrader prices so the experience is realistic — but it is a simulation, not routed client execution, and no trader deposit is placed on a live market. That single design choice is what keeps most operators outside brokerage licensing, and it is deliberate.

It does not make you exempt from everything. You still register a company, pay tax, follow advertising and consumer rules, and honour your terms. It means you are running a legitimate software business, not a regulated broker.

> **Launch on simulated evaluations and skip the brokerage-licence path. From $129.** [Start your firm from $129 →](https://www.propexecutor.com/pricing)

## The map by region (general, not legal advice)

| Region | The general picture |
| --- | --- |
| United States | Strictest. Off-exchange retail draws CFTC/SEC scrutiny; many firms exclude US customers. Take specialist advice. |
| UK / EU | Focus on whether you provide a regulated investment service; the simulated model is generally lighter-touch. |
| UAE / Dubai | A popular, business-friendly hub for new firms; still register and confirm locally. |
| India | Company registration and compliant payments matter; the simulated model is generally treated as a software business. |

Wherever you are, the pattern repeats: the **real-capital model invites regulation; the simulated model is generally treated as a product business** — confirm it for your country.

## The practical checklist before you launch

1. Register a company in a suitable jurisdiction.
2. Take local legal advice on how the simulated-evaluation model is classified there.
3. Write clear terms, a payout policy and a refund policy.
4. Set up compliant payment processing.
5. Decide which countries you will and will not serve.
6. Then buy the platform and launch.

Notice that the platform is step six, not step one — and on PropExecutor it is a one-time $129, so it is never the expensive or risky part of this list.

> **Get the legal side right, then launch the software for one payment.** [See the price list →](https://www.propexecutor.com/pricing)

## The bottom line

Do you need a licence to start a prop firm? If you run real client capital, usually yes. If you run **simulated evaluations on simulated accounts**, usually no brokerage licence — you run it as a registered software business, take local advice, and keep real client money out of it. That is the model most founders use, and it is the model PropExecutor is built for.

> **A simulated-evaluation prop firm, branded and live, from $129 once.** [See PropExecutor's plans →](https://www.propexecutor.com/pricing)

Keep reading: [how to start a prop firm](https://www.propexecutor.com/blog/how-to-start-a-prop-firm), [simulated vs real-capital models](https://www.propexecutor.com/blog/how-prop-firms-make-money), or [start a prop firm in Dubai](https://www.propexecutor.com/blog/start-a-prop-firm-in-dubai). Ready? [See the plans](https://www.propexecutor.com/pricing).