Pennsylvania bill would regulate prediction markets while allowing sports contracts

Pennsylvania lawmakers are considering legislation that would establish a state regulatory framework for prediction market platforms such as Kalshi and Polymarket without prohibiting sports event contracts.

Rep. Tarik Khan has introduced HB 2711 as states continue to take differing approaches to exchanges regulated federally by the Commodity Futures Trading Commission (CFTC).

The bipartisan bill has been sponsored by 24 House members, including 20 Democrats and four Republicans. It has been referred to the Consumer Protection, Technology & Utilities Committee for a reading and vote.

HB 2711 would require prediction market participants to be at least 21 years old and would introduce consumer protection and integrity requirements similar to those applied to sports betting. Providers would have to offer self-exclusion programs, identify potential market manipulation involving employees with access to nonpublic information, and notify the state of suspected insider trading.

The legislation would prohibit contracts involving high school sports or sports involving minors. It would also ban markets concerning an individual’s health status or death, including assassinations, assassination attempts, and mass casualty events. Sports event contracts are not included in the proposed list of prohibited markets.

The bill also states, “A provider may not offer a prediction market in this Commonwealth if the prediction market includes, as a liquidity provider or market maker, a person that knowingly engages in a gaming activity in the ordinary course of business.”

That provision would likely prevent DraftKings and FanDuel, both licensed sportsbook operators in Pennsylvania, from operating their prediction market platforms in the state.

HB 2711 would authorize Pennsylvania to impose civil penalties for violations of the proposed framework. A provider could be fined up to $10,000 for each violation, while persistent breaches involving market making, participation exclusions, or trading based on nonpublic information could result in a $50,000 penalty.

Penalties for individual liability violations could exceed $50,000 or equal twice the amount of profits gained or losses avoided. The Pennsylvania attorney general could also seek a court order barring an operator with numerous violations. An operator that continued operating in defiance of such an order could face a fine of $1 million per day.

The proposal differs from measures pursued in other states, some of which have sought to prohibit prediction markets or impose taxes on trading exchanges despite their regulation by the CFTC. North Carolina recently approved a 6% tax on prediction market operators while allowing them to offer sports contracts without a state license.

Illinois also recently approved a tax on prediction market operators through its state budget. The CFTC is suing Illinois and other states, while the federal agency and CFTC-approved exchanges argue that federally regulated prediction markets are exempt from state laws.

Kalshi, Polymarket, and other prediction market platforms are also involved in multiple lawsuits with states that have legal sports betting.