Is Trading With Prop Firms Halal?
Hanafi Fiqh
Answered by Mawlana Ilyas Patel
Question
I trade E-mini Nasdaq futures (NQ) through a prop firm called Tradeify using simulated evaluation accounts and profit-split payouts. Is this permissible in Islam?
Answer
In the Name of Allah, the Most Merciful and Compassionate.
It is not permissible to trade through any of the prop firms due to fees for an unrecognized service, learning of impermissible trades, potential training on non-Shariah-compliant instruments, and profit sharing from unlawful trade activity.
A proprietary trading firm (prop firm) allows a trader to participate in financial markets under the firm’s rules using a simulated account.
Traders pay a non-refundable fee. The trader does not trade with real capital at any stage. If the trader passes the evaluation phase, he may be eligible for monetary payouts, even though trading occurs in a simulated account.
Allah Most High says, “O you who believe, do not consume one another’s wealth through falsehood — except that it be trade by mutual consent” [Quran 4:29]
Abu Huraira (Allah be pleased with him) reported that Allah’s Messenger (Allah bless him and give him peace) forbade a transaction determined by throwing stones, and the type that involves some uncertainty. [Muslim]
Whoever Establishes a Good Practice in Islam
Jarir (Allah be pleased with him) reported: The Prophet (Allah bless him and give him peace) said, “Whoever establishes a good practice in Islam will have its reward and the reward of whoever acts upon it, without diminishing their rewards at all. Whoever institutes an evil practice in Islam will have its sin and the sin of those who act upon it, without diminishing their sins at all.” [Muslim]
It is impermissible to pay a sum when the return is contingent on an uncertain outcome. [Kasani, Bada’i al-Sana’i]
The trading involves inputs and activities, including educating others on executing unlawful transactions, such as through CFDs and futures, all of which are non-Shariah compliant.
A Genuine Asset is a Must to Earn Income
To earn value and income, one must provide a genuine asset or service. And without it is unjust enrichment. Every transaction must be value-added that benefits the other party in every way.
Look for real spot trading backed by actual possession, genuine Shariah-screened equities, and halal-based trading firms.
And Allah knows best.
[Mawlana] Ilyas Patel
Checked and Approved by Shaykh Faraz Rabbani
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Mawlana Ilyas Patel has received traditional education in various countries. He started his schooling in the UK and completed his hifz of the Quran in India. After that, he joined an Islamic seminary in the UK, where he studied secular and Aalimiyya sciences. Later, he traveled to Karachi, Pakistan, and other Middle Eastern countries to further his education. Mawlana has served as an Imam in the Republic of Ireland for several years and taught the Quran and other Islamic sciences to both children and adults. He also worked as a teacher and librarian at a local Islamic seminary in the UK for 12 years. Presently, he lives in the UK with his wife and is interested in books and gardening.
