Pennsylvania Bill Proposes New Regulatory Approach for Prediction Markets
The proposal would establish operating rules for prediction markets without imposing a tax, distinguishing Pennsylvania from several other states.
Pennsylvania lawmakers have introduced legislation that would create a regulatory framework for prediction markets without taxing the industry. The proposal distinguishes Pennsylvania from other states that have instead focused on taxing prediction markets, banning certain contracts or pursuing enforcement actions against operators.
House Bill 2711, introduced July 22 by Rep. Tarik Khan and more than two dozen co-sponsors, would create a new chapter in Pennsylvania law dedicated to prediction markets. The bill establishes operational standards governing participation, market integrity and consumer protections.
Pennsylvania Bill Would Create Regulatory Framework
HB 2711 would define prediction markets under Pennsylvania law and establish requirements for operators. Among its key provisions, the bill would:
- Set the minimum participation age at 21.
- Require operators to implement consumer protection measures, including excluding self-excluded users, employees and individuals possessing material nonpublic information.
- Prohibit contracts involving high school sporting events or events involving minor participants.
- Prohibit markets based on an individual’s health status.
- Ban “death markets,” including contracts tied to an individual’s death, assassination, attempted killing or mass casualty events.
The bill also requires operators to implement “commercially reasonable and technically feasible” measures to detect fraud, market manipulation and the misuse of nonpublic information.
HB 2711 also prohibits individuals from using inside information or attempting to influence the outcome of an event for financial gain through a prediction market. Unlike some legislative proposals in other states, HB 2711 does not prohibit most sports prediction markets.
Bill Would Restrict Gaming Partnerships and Strengthen Enforcement
The proposal also seeks to separate prediction markets from traditional gambling businesses.
Under the bill, providers could not offer markets in Pennsylvania if a liquidity provider or market maker knowingly engages in gaming activity in the ordinary course of business.
It would also prohibit certain market-making and revenue-sharing arrangements involving entities that engage in gaming activities. The bill, however, does not specify how those provisions would apply to prediction market platforms affiliated with sportsbooks, such as DraftKings and FanDuel.
HB 2711 gives enforcement authority to the Pennsylvania Attorney General and local district attorneys, rather than to the Pennsylvania Gaming Control Board. Providers who violate the law could face civil penalties and court-ordered injunctions. If they continue operating after an injunction, they will face fines of up to $1 million per day.
States Take Different Approaches To Prediction Markets
Pennsylvania’s proposal adds to a growing patchwork of state policies governing prediction markets.
Minnesota has adopted the most restrictive approach. Lawmakers earlier this year approved legislation prohibiting the operation, facilitation, servicing, or advertising of prediction markets on a broad range of subjects, including sports and politics. The law triggered lawsuits by the Commodity Futures Trading Commission (CFTC) and operators such as Kalshi and Polymarket.
Kentucky and Illinois have combined taxation with broader regulatory measures. Kentucky imposed a 14.25% tax on revenue from online prediction markets. Illinois has likewise approved a tax on contracts for sports event prediction markets. Illinois also requires exchanges to obtain a state license. Kentucky and Illinois also face legal challenges by the CFTC and operators.
North Carolina took a different approach, imposing a 6% tax on net trading revenue without creating a dedicated regulatory framework for providers.
Elsewhere, Tennessee enacted a much narrower measure. The state made it a Class E felony for a person to intentionally influence the outcome of an event while participating in a prediction market contract tied to that outcome. Unlike Pennsylvania or Illinois, Tennessee’s law does not establish a regulatory framework.
Taken together, the measures illustrate how states are increasingly moving to address prediction markets, albeit taking different approaches. While some have prioritized taxation, litigation or outright prohibitions, Pennsylvania’s proposal instead focuses on creating operational rules governing how the products may be offered.
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