For more than twenty years, the $25,000 equity minimum has been a barrier to entry for aspiring day traders in the United States.

Now, FINRA’s push to replace that requirement with a margin-based framework has triggered sharp debate about whether this change will empower retail investors or expose them to new risks.

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In what the regulator described as an effort to “enhance its regulatory effectiveness,” the watchdog’s Board is seeking to replace the $25,000 minimum equity requirement with an intraday margin rule.

How the $25K Rule Could Shift Markets

This change effectively dismantles one of the biggest barriers to retail participation in active trading. Since 2001, anyone who wanted to day trade in the U.S. needed to maintain at least $25,000 in their brokerage account or face severe trading restrictions.

By shifting to a margin-based approach, FINRA would allow trading activity to be governed by how much risk an investor takes on during the day, rather than a fixed dollar threshold. That means a trader with as little as $2,000—an amount floated in draft discussions—could potentially qualify to day trade.

Facilitating "Fair Capital Markets"

“The Board’s recent approval and discussion of various rule proposals are a key part of FINRA's ongoing efforts to enhance its regulatory effectiveness and efficiency through the FINRA Forward initiative,” said FINRA Board Chair Scott Curtis.

Scott Curtis, Source: LinkedIn

“The Board and FINRA’s leadership team will continue to prioritize helping enable member firms to better serve investors and facilitate strong and fair capital markets.”

Fintech platforms and brokerages have pressed FINRA to drop what they call an outdated restriction from the dot-com era. Anthony Denier, CEO of Webull Financial, argued that the original rule reflected a time when retail investors lacked access to real-time pricing and news.

Related: FINRA Advances Proposal to Replace $25K Minimum for Day Traders with Margin Standards

Anthony Denier, Source: LinkedIn

“This rule was created at a time when retail investors' access to information, pricing, and news was greatly disadvantaged. Times have changed, and the rule needs to be changed as well by removing the minimum dollar amount requirement,” Anthony Denier, CEO of trading platform Webull Financial, weighed in on the proposed changes.

Academics Warn the Risks Haven’t Changed

Not everyone is convinced that lifting restrictions solves the core problem. Haoxiang Zhu, professor at MIT’s Sloan School of Management and a former SEC official, stressed that margin-based trading remains inherently risky.

“Today, trading is often commission-free, although not in all securities, and there's less concern about excessive commission cost,” said Haoxiang Zhu, a finance professor at MIT's Sloan School of Management and former SEC official, quoted by Bloomberg.

Haoxiang Zhu, a finance professor at MIT's Sloan School of Management
Haoxiang Zhu, a finance professor at MIT's Sloan School of Management

The most direct impact of scrapping the $25,000 rule would be felt by retail investors who have long viewed it as an insurmountable barrier.

The surge in options trading heightens that concern. The U.S. options market has grown more than 20% in the past year, with retail traders increasingly using derivatives to make leveraged bets. Lowering barriers could accelerate that trend, amplifying both gains and losses.

FINRA’s proposal now sits with the Securities and Exchange Commission for review. Approval could push implementation into late 2025 or 2026, leaving time for continued debate.

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Source: Finance Magnates