The 46-year-old billionaire was all but unanimously elected head of the Right Cause party by its members.
Right Cause is seen as a Kremlin creation designed to lure opposition-minded, pro-business voters, while building an illusion of competition with the ruling United Russia party ahead December's parliamentary elections.
Prokhorov said last month he was targeting second place in that vote.
President Dmitry Medvedev said on Monday that Russia needs more political competition, but the Justice Ministry made a mockery of that only days later when it denied registration to a real opposition party.
Addressing party members on Saturday, Prokhorov underlined that Right Cause would focus on building a viable capitalism in Russia, but — perhaps wary of alienating older voters accustomed to state support — he added socialism still had its place in Russian society.
"Our main slogan, 'Capitalism for all,' is not true. That's not possible. Capitalism is only for people who like to take risks, who like to take this responsibility upon themselves. An intelligent, professional and fair state should give others social guarantees and support," Prokhorov said.
Much like fellow tycoon Alexander Lebedev, who has invested heavily in British media, Prokhorov on the surface appears to be walking proof that Russia can cultivate modern business professionals, and he plays an ambassadorial role for his homeland as an investment haven.
But some critics say these are merely PR counterweights to cases like Mikhail Khodorkovsky, once Russia's richest man, who was jailed on charges seen as politically motivated after he funded opposition parties and threatened to sell off major assets to American companies. The Khodorkovsky case was seen as mammoth blow to the country's aspirations to become a major investment hub.
Prokhorov, with a net worth thought to be around $18 billion, made his fortune in metals and banking, and became a majority stakeholder in the New Jersey Nets in May of last year.
On Saturday, a few hundred supporters of the opposition party whose registration was rejected protested the decision in central Moscow.
The People's Freedom Party, whose leaders include former Prime Minister Mikhail Kasyanov and former deputy Prime Minister Boris Nemtsov, had hoped to take part in the parliamentary vote. The Justice Ministry claimed some of the signatories required by law to support the application were dead or had been included without their knowledge.
No arrests were reported at the rally.