Pennsylvania Lawmakers Propose Fresh Regulatory Strategy for Prediction Market Operations

Pennsylvania legislators have put forward a bill that aims to establish a clear regulatory structure for prediction markets, notably without imposing taxes on the industry. This initiative sets Pennsylvania apart from other states that have primarily targeted prediction markets through taxation, bans on certain contracts, or legal action against operators.

House Bill 2711, introduced on July 22 by Rep. Tarik Khan alongside over twenty co-sponsors, proposes adding a dedicated chapter to Pennsylvania law specifically for prediction markets. The legislation outlines standards for operation, integrity, and consumer safeguards.

Pennsylvania Bill Would Create Regulatory Framework

HB 2711 aims to formally recognize prediction markets within Pennsylvania’s legal system and lays out specific requirements for those running these platforms. Key elements include:

• Establishing the minimum participation age at 21.

• Mandating consumer protection measures, such as excluding self-excluded users, employees, and individuals with material nonpublic information.

• Banning contracts related to high school sports or minors.

• Prohibiting markets based on an individual’s health status.

• Outlawing “death markets,” including contracts linked to death, assassination, attempted killing, or mass casualty events.

The bill also emphasizes the importance of fraud detection, requiring operators to adopt “commercially reasonable and technically feasible” measures to prevent market manipulation and misuse of nonpublic information.

Furthermore, HB 2711 restricts individuals from using inside information or attempting to influence event outcomes for financial gain. Notably, unlike some legislative efforts in other states, the bill does not ban most sports prediction markets.

Regulatory Boundaries and Enforcement

The proposal also seeks to delineate prediction markets from traditional gambling enterprises. Under the bill, providers would be barred from offering markets in Pennsylvania if a liquidity provider or market maker is knowingly involved in gaming activities as part of their regular business. It also restricts certain revenue-sharing arrangements involving gaming entities, although it doesn’t specify how this applies to platforms tied to sportsbooks like DraftKings and FanDuel.

Enforcement would fall under the authority of the Pennsylvania Attorney General and local district attorneys, rather than the state’s gaming commission. Violators could face civil penalties and court-ordered injunctions, with continued violations risking fines up to $1 million daily.

Read Also: Brazil Launches Public Inquiry on New Regulations for Betting Licenses

Diverse State Approaches to Prediction Markets

Pennsylvania’s initiative adds to a complex mosaic of state policies on prediction markets. Minnesota has adopted the most restrictive stance, passing legislation earlier this year that bans operation, facilitation, servicing, or advertising of prediction markets across various topics, including sports and politics. This law has led to legal challenges from the CFTC and operators like Kalshi and Polymarket.

Kentucky and Illinois have combined regulations and taxation. Kentucky imposes a 14.25% tax on online prediction market revenue, and Illinois has implemented a tax on sports prediction contracts, along with licensing requirements. Both states face ongoing legal disputes involving the CFTC.
North Carolina opted for a simpler approach, taxing net trading revenue at 6% but not establishing a formal regulatory framework for providers.

Tennessee’s approach is narrower: it classifies knowingly influencing event outcomes for prediction market contracts as a Class E felony. However, it does not set up a regulatory structure like Pennsylvania’s.
Overall, these differing policies reflect how states are increasingly engaging with prediction markets, though their methods vary from taxes and legal bans to regulatory frameworks. Pennsylvania’s focus on operational rules marks a distinct approach in this evolving landscape. Pennsylvania Regulatory