Pennsylvania advances bill to regulate prediction markets

Bipartisan proposal targets prediction markets

Pennsylvania lawmakers are evaluating new legislation that would regulate prediction markets, including platforms such as Kalshi and Polymarket. Representative Tarik Khan introduced House Bill 2711 (HB 2711), a bipartisan initiative backed by 24 legislators—20 Democrats and four Republicans.

The proposal has been referred to the House Consumer Protection, Technology & Utilities Committee, where it will be reviewed before advancing through the legislative process.

Consumer protection and market integrity measures

The bill would establish a regulatory framework similar to that used for sports betting operators. Among its key provisions, prediction market platforms would be required to:

Offer self-exclusion programs for users.

Monitor and report potential market manipulation.

Notify state authorities of suspected insider trading.

Restrict participation to individuals aged 21 and over.

HB 2711 would also ban contracts related to high school or youth sports, as well as markets involving an individual's health status, death, assassinations, attempted assassinations or mass casualty events.

However, unlike some proposals introduced in other U.S. jurisdictions, the Pennsylvania bill does not prohibit sports event contracts, allowing operators to continue offering these products if they comply with the proposed regulations.

Restrictions on gaming operators

One notable provision would prevent companies already engaged in gaming activities from acting as liquidity providers or market makers within prediction markets.

If enacted, this restriction could effectively prevent licensed Pennsylvania sportsbooks such as DraftKings and FanDuel from operating prediction market platforms under the proposed framework.

Significant penalties for non-compliance

The legislation would authorize Pennsylvania regulators to impose substantial civil penalties on operators that violate the rules.

Fines could reach up to $10,000 per violation, while repeated breaches involving market making, participation restrictions or misuse of nonpublic information could result in penalties of up to $50,000.

Individuals found responsible for serious violations could face penalties exceeding $50,000 or twice the profits gained or losses avoided through the misconduct.

Additionally, the Pennsylvania Attorney General would have the authority to seek a court order preventing repeat offenders from operating in the state. Operators that ignore such an order could face fines of $1 million per day.

A different regulatory approach

The proposal stands out as several U.S. states have instead attempted to ban prediction markets or impose taxes on federally regulated exchanges. Platforms such as Kalshi and Polymarket are currently involved in legal disputes with multiple states over whether they must comply with state gambling laws.

The Commodity Futures Trading Commission (CFTC), which regulates these exchanges at the federal level, has argued that approved prediction market operators are exempt from certain state regulations. It remains unclear whether the agency or the exchanges will support Pennsylvania's regulatory framework or challenge it in court.

Although HB 2711 is still in the early stages of the legislative process, it represents one of the first attempts by a state with an established sports betting market to regulate, rather than prohibit, prediction markets while allowing sports event contracts under state oversight.