Futures prop firms struggle with shrinking margins
TradersYard’s co-founder and CEO Manuel Sonnleithner reports that futures prop trading firms are now losing money on the $49 monthly challenge model that once generated strong profits. Industry data shows net margins have plummeted from 25-30% to 10-15%, driven by three key pressures: declining trader fees, fixed operational costs, and rising payout obligations.
Price Cuts and Cost Pressures
The cost for traders to enter these challenges has fallen sharply. Topstep’s $50,000 account challenge, which initially required $49 per month plus a $149 activation fee, now yields about $200 per passing trader—excluding resets—down from earlier levels. Competitors like Lucid have eliminated activation fees entirely, further squeezing revenue. Some firms now charge traders an effective $90-$100, which has significantly reduced income per conversion.
Competition has intensified the price war. The5ers founder Gil Ben Hur describes the shift as a “race to the bottom,” fueled by new entrants offering similar products with relaxed trading rules. This followed a 2024 industry shakeout, during which challenge pass rates declined and average trader investments dropped by about 50%. Meanwhile, firms’ operational costs have remained unchanged.
Platform fees are tied to per-user pricing, making it difficult to reduce expenses. Sonnleithner noted that if a firm pays $30 per user monthly to its technology provider, offering a $49 challenge becomes financially unsustainable. Futures firms face higher operating costs than CFD prop firms, including CME market-data fees and professional-tier data classifications that can push monthly costs to $2,000 per user. Ruben Abitbol of RUBIK identified Tradovate and NinjaTrader as major cost drivers, while Anish Lal of Blackbull Markets pointed to CME’s per-active-user billing, an arrangement that conflicts with one-time challenge sales.
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Payout obligations add another layer of financial strain. Abitbol’s broad benchmark puts CFD prop payout ratios at 40-50% and futures at 70-80%, with futures firms making up the difference through “significantly higher volume.” Futures traders also tend to be more sophisticated, he said, and profitable traders “can represent a much larger liability” while they remain in a simulated environment. Tradeify’s Vinan Mistry told Finance Magnates that fraud is the firm’s biggest internal risk, including hedging groups that are getting harder to catch, while Shervin Arian put the dividing line in pricing of liabilities: the firms that hold margin “price payout liability accurately rather than cutting fees.
Profitability Decline and Firm Exits
In response to declining margins, firms have tightened payout terms. Lower caps, stricter profit requirements, and earlier transitions to live accounts have become standard practices. FundingTicks and FundingPips’ futures division launched in July 2025 but began winding down by January 2026 after introducing a one-minute hold rule, higher daily profit thresholds, and reduced profit splits. Sonnleithner attributes their exit to fee cuts aimed at gaining market share, followed by significant financial losses, though he acknowledges pricing was not the sole factor.
Dependency on third-party platforms has accelerated closures. Alpha Futures shut its Premium Plan in July 2025 after NinjaTrader ended its partnership, refunding traders but refusing to honor pending payouts beyond what was already paid. The firm kept other plans operational. The Funded Trader’s Angelo Ciaramello closed Rev One in August due to the lack of a top-tier platform option, calling it a critical obstacle to scaling. FundedSeat followed in late September, after two years and $700,000 in monthly payouts, citing limitations imposed by major trading platforms like NinjaTrader and Tradovate.
