Most weeks I take a call from a prop firm founder who’s just been turned down by a payment processor. Different name on the rejection email. Same five reasons underneath.
It’s rarely personal. It’s almost never about your specific business. The pattern is so consistent that after the third or fourth call, I started keeping a list. Here it is.
1. The MCC code problem
Every business that takes card payments gets categorised under a Merchant Category Code — a four-digit number that tells the card networks what kind of company you are. Florists, airlines, dentists, casinos: all have their own MCC.
Prop trading does not.
There is no clean MCC for “we sell trading evaluations to retail traders, with a profit-share component if they pass.” The closest options are some flavour of financial services (which triggers heavier scrutiny), gaming (technically wrong, but visually similar from a fund-flow perspective), or educational services (which a strict underwriter will reject as misclassification).
Whichever the underwriter picks, two things happen. The application gets escalated to a senior risk reviewer, and the file goes onto a watchlist for chargeback monitoring. From the moment your account opens, you’re being measured against thresholds designed for businesses that don’t operate like yours.
2. The chargeback math
The card networks publish chargeback ratio thresholds. Cross 0.9% and you enter monitoring. Cross 1.5% and you can be terminated. The thresholds apply equally whether you’re selling t-shirts or trading challenges.
Prop firms run hot on chargebacks for reasons that have nothing to do with running the business badly. A trader buys a $500 challenge, blows it in 36 hours, regrets the impulse purchase, and disputes the charge. That single dispute can take five $100 successful transactions to dilute back below the threshold.
Underwriters know this. When the application is for a business that sells digital evaluations to retail consumers with no physical product to ship and no easily-proven delivery, the projected chargeback profile alone is enough to decline.
The pattern is so consistent that after the third or fourth call, I started keeping a list. Different name on the rejection email. Same five reasons underneath.
3. The regulatory grey zone
Prop trading sits in a regulatory space that supervisors haven’t fully decided about yet. Are you a financial services business? An entertainment business? A skill-based competition? An educational platform?
The honest answer is: depends on the jurisdiction, depends on the product, and depends who you ask.
That ambiguity is fine for the firm itself. It’s not fine for a payment processor’s compliance team, who need to file a clear answer in their internal risk file. When the answer isn’t clear, the safe internal decision is to decline.
This is also why processors will sometimes onboard you, run for six months, and then close the account. Their compliance review cycle came around. The reviewer didn’t like the file. The decision flipped.
4. Fund-flow patterns that look like something else
A processor’s fraud system doesn’t read your website. It looks at money movement.
In a prop firm, the typical pattern is: many small inbound payments from retail consumers (challenge fees), followed weeks later by a smaller number of larger outbound payments to the same or different consumers (payouts to funded traders). Same direction money flowed in, now flowing out, often via different rails.
That pattern looks similar to several other things a processor’s system flags: gambling, MLM compensation, deposit-and-withdraw schemes, money transmission. None of those are what a prop firm actually is. But the pattern recognition layer doesn’t know that. By the time a human reviews it, the account is already frozen.
5. Explicit policy exclusions
This one has changed in the last year, and most firms haven’t caught up.
A growing number of major processors now explicitly list prop trading as a prohibited business in their published terms. Not “high-risk” — prohibited. The risk team isn’t reviewing your file at all; the answer is decided before they look.
If you’re applying to a processor whose terms exclude you outright, you can have the cleanest financials in the industry and a perfect chargeback record. The application is going to come back rejected, often with a generic “we are unable to support your business at this time” line that gives you nothing to work with.
It’s worth searching the prohibited businesses page of any processor before you apply. The information is public, and most founders skip it.
Why it’s getting harder, not easier
The trend over the last two years has been one direction: more processors getting more explicit about excluding prop trading.
Card networks have been pushing acquirers to tighten their books on consumer-facing financial products. Acquirers in turn have been pushing processors to tighten merchant categories. Processors have been updating their terms.
The firms that got onboarded easily in 2022 and 2023 are not seeing the same answers in 2025 and 2026. Renewals are coming back with rate increases. New applications are being declined that would have been approved two years ago.
This isn’t pessimism. It’s the actual direction of travel.
What you can actually do
There are three real options if you’re sitting on a rejection.
Apply to a processor that supports prop trading explicitly. A small number of processors will work with prop firms — usually with higher base rates, monthly minimums, and substantial rolling reserves. Manageable if you have the volume to absorb it. Hard to make the math work if you’re a newer firm.
Work through a Merchant of Record. An MOR sits between you and the processor. Their underwriting framework already accounts for prop trading. You inherit aggregated rates instead of starting from scratch. New firms can be live in days rather than waiting weeks for an underwriting decision that may go against them anyway.
Accept that this is a structural problem. Whatever path you pick, build your operations assuming you may need to switch processors at some point. Keep your customer data exportable. Keep your reconciliation independent of any single provider. Don’t tie your checkout deeply to one PSP’s hosted fields. The firms that handle a forced migration well are the ones who built for it before they needed it.
We built TradoPay for the second option. If you’ve just been rejected and you’d like to compare what aggregated MOR pricing looks like for your firm — including what your actual rates would be at your current volume — get in touch. We’ll come back within one business day.
If this sounds familiar
Tell us about your firm. We’ll come back within one business day with what we can actually do for you.