🔎 A Closer Look at Topstep, Self-Regulation, and the Future of Retail Prop Firms

In early 2024, Michael Patak, founder of Topstep, proposed the formation of a Self-Regulatory Organization (SRO) — a new industry body composed entirely of prop firm CEOs. On its surface, this might sound like a move toward accountability and transparency in an industry that’s often accused of operating in legal gray areas. But the reality is far more complicated.

Patak framed the SRO as a way to bring “structure” to the prop firm world. But what kind of structure, and who benefits from it? In a February post on X, he stated that the group of CEOs was “working to squash hedging across firms.” That’s not just about policy alignment. That’s about coordination, data sharing, and potentially — surveillance.

The Quiet Launch of Topstep X

Around the same time, Topstep introduced a new platform: Topstep X. What they didn’t advertise is that this new platform is a white-labeled version of a system called Project X, which is built and maintained by former Topstep employees.

Project X includes a feature called cross-firm risk monitoring. In plain terms, if you’re trading with more than one prop firm at the same time — even across completely separate platforms — both firms can be notified instantly. The system flags it, logs it, and reports it. You don’t need to approve anything. It just happens.

It’s a level of behind-the-scenes coordination that many traders had no idea was taking place. When influencer Kelly Ann sarcastically dubbed the platform “SnitchX,” it wasn’t just criticism — it was an accurate description of how the technology operates.

Not a Conspiracy. Just the Business Model.

Let’s be clear: this isn’t a conspiracy theory. It’s a simple truth about how modern prop firms are trying to evolve — and what they’re trying to protect.

Retail firms are working to build a new regulatory body not because one doesn’t exist, but because the one that does — the National Futures Association (NFA) — might hold them accountable.

Under the current model, most retail evaluation firms avoid regulation by operating exclusively in simulated environments. Traders aren’t trading real capital. The firms don’t take on actual market risk. The entire setup is framed as “educational,” allowing these companies to sidestep oversight from agencies like the CFTC, which focuses on real trades, real brokers, and real customer funds.

This means firms can deny payouts without regulatory scrutiny, enforce vague “consistency rules,” and hide behind refund policies buried in endless support ticket chains. And when customers complain? The firms can claim that no real money was ever at stake.

So Why Build a New SRO?

There already is a valid self-regulatory body for futures: the NFA. It exists, it functions, and it holds members to real standards. Institutional firms like Jane Street or DRW are subject to its authority. But retail firms have chosen to opt out.

Creating a new SRO — one operated by the very CEOs whose firms benefit from looser standards — allows them to control the narrative. They can display a badge that says “self-regulated” without facing any meaningful consequences. It looks good on a homepage. It sounds trustworthy in a promo video. But it doesn’t protect the trader.

It protects the firm.

Regulation vs. Reputation

This movement isn’t about ethics. It’s about optics. A self-governed SRO allows prop firms to avoid questions they don’t want to answer: Why are payout times inconsistent? Why do accounts get revoked after successful evaluations? Why are terms of service so vague and difficult to challenge?

A real SRO — like the NFA — would force firms to answer those questions. It would require them to clarify risk disclosures, refund policies, and data-sharing practices. That level of accountability isn’t something many firms are willing to accept. And so, they’ve chosen another path: to look regulated, without actually being regulated.

The Bottom Line

Retail traders deserve transparency, not theater. They deserve to know when their data is being shared, who has access to their trades, and what recourse exists when something goes wrong. The idea of building a new SRO sounds, on the surface, like a step forward. But in practice, it’s a way for firms to police themselves — and avoid the accountability they would face under existing systems.

The real solution isn’t to invent a new set of rules. It’s to join the ones we already have.