How Prop Firms Actually Make Money (And Why It's Aligned With You)

Every few months, a thread on Reddit or Twitter circulates claiming prop firms are scams that profit from trader losses. The reality is more nuanced — and on a healthy firm, the incentives are tightly aligned with trader success.

Revenue Stream #1: Evaluation Fees

Most firms cover their operating cost from challenge fees. RoyaleFunded fees range from $49 to $249 depending on account size. Conversion from challenge to funded sits around 5–10% industry-wide.

Revenue Stream #2: Profit Share

Funded accounts pay 10% of profits to the firm. On a $100K account hitting 4% monthly, that's $400/mo to the firm and $3,600 to the trader. The longer a trader stays profitable, the more both sides earn.

Revenue Stream #3: A-Book Routing

Top traders are routed live to liquidity providers. The firm earns from the spread/commission and shares risk with the LP. This is why healthy firms actively want winning traders — they monetize them through the LP relationship, not by betting against them.

Why The Incentives Align

• Refundable fees mean the firm only keeps fees from non-converters — and most non-converters fail because of process, not bad faith from the firm.
• Bi-weekly payouts force the firm to build cash flow that scales with trader success.
• Public Trustpilot scores create reputational accountability — bad behavior shows up within weeks.
• Scaling plans reward consistency, locking in long-term, profitable traders that the firm wants to keep on the books.

RoyaleFunded operates on this aligned-incentive model. Every funded trader is an asset, not a liability.