A new bill in Pennsylvania would establish rules against insider trading for prediction markets. It also aims to prevent sportsbooks and other gambling businesses from controlling or providing the main source of funds for these platforms.
Summary
- Pennsylvania lawmakers have introduced a bipartisan bill that would bar gambling companies from acting as liquidity providers or market makers for prediction markets.
- The proposal would also add insider trading rules, consumer protections, and age restrictions without creating a state licensing system.
- A separate Pennsylvania bill would require prediction market operators to obtain state licenses and pay a 22% tax on revenue.
- The legislation comes as sportsbooks expand into prediction market infrastructure and legal disputes over federal and state authority continue.
- Neither prediction market bill has received a committee hearing or vote in the Pennsylvania House.
Representative Tarik Khan introduced House Bill 2711 on July 22nd. The bill has support from 24 lawmakers – 20 Democrats and 4 Republicans – and focuses on setting rules and safeguards for prediction markets. Instead of requiring licenses or prohibiting them altogether, the bill aims to regulate how these markets operate and protect consumers.
Pennsylvania bill targets sportsbook role in prediction markets
The main point of this proposal is that a company offering prediction markets in Pennsylvania wouldn’t be allowed to operate if its financial backers are involved in regular gambling, no matter where that gambling takes place.
This rule would apply not just to companies themselves, but also to their owners, related businesses, employees, and anyone else working on their behalf financially. Additionally, those running prediction markets wouldn’t be allowed to make deals or share profits with companies that typically offer gambling services.
The new law doesn’t clearly explain what counts as “gaming activity” in the section about prediction markets. It’s also unclear how the rules would affect exchanges linked to sportsbooks, which could lead to confusion about how the law will be understood by regulators and courts if it’s passed.
The timing is significant because many gambling companies are now moving beyond standard sports betting and venturing into new areas of event contracts overseen by federal regulators. For example, DraftKings recently started its own exchange, DKeX, after buying Railbird Technologies, which was already approved by the CFTC. Both DraftKings and Flutter are also starting to participate in markets where people predict the outcomes of events.
This plan, if understood in a wide-ranging way, might stop companies linked to sportsbooks from supporting betting on future events for people in Pennsylvania. It could also create issues with agreements where prediction markets share profits with casinos, sportsbooks, or related gambling companies.
While some states are trying to ban prediction markets completely, Arizona’s HB 2711 takes a different approach. It would establish rules for how these markets operate, but keep their systems separate from traditional gambling companies.
Consumer protections accompany the liquidity restriction
In addition to allowing market making, the new law would set rules for how prediction platforms must operate.
As a crypto investor, it’s good to know the rules are being set up so that only adults – 21 and over – can participate. More importantly, the platforms running these things will have to actively block anyone who’s self-excluded, their own employees, people working with the payment systems, and anyone with inside information that isn’t public. That all sounds pretty reasonable to me, and helps build trust in the space.
As a researcher in this area, I’ve found that any service offering these tools would also require strong, practical protections. These safeguards are crucial to prevent fraud, ensure fair market practices, and protect sensitive data from being misused. Essentially, we need to build in systems to keep everything secure and honest.
This new rule would ban bets on high school sports, competitions with underage athletes, and wagers based on someone’s health. It also specifically prohibits betting on things like a person’s death, assassination attempts, or large-scale violent events – referred to as “death markets” in the proposal.
People involved in sports or politics – like players, coaches, event staff, politicians, and their teams – could be legally responsible if they profit from deals related to the outcomes of games or elections.
Instead of setting up a system for licenses, this bill empowers the Pennsylvania Attorney General to handle any issues that arise. They could look into violations, issue fines, and shut down platforms that don’t follow the new regulations.
Companion proposal would create licensing and taxation
As an analyst, I’m tracking that this new bill, which focuses on how people *act*, comes on the heels of another proposal already being considered by the Pennsylvania House – one that would create a prediction market. It’s interesting to see these two approaches being considered concurrently.
Representative Danilo Burgos recently proposed a bill – House Bill 2497 – that would change how prediction markets are regulated in Pennsylvania. Currently, these markets largely follow federal rules, but the bill would require them to get licenses directly from the Pennsylvania Gaming Control Board.
As a crypto investor looking at potential opportunities in sports betting, I’m seeing some pretty hefty costs if this new bill, HB 2497, passes. Basically, to even *get* a license to operate, it’ll cost a cool $1 million upfront. Then, just to keep that license active each year, another $1 million is due! On top of that, they want to tax 20% of all the revenue generated from bets, plus an extra 2% that goes to local communities. It’s a significant financial hurdle, and definitely something I’m factoring into my analysis.
The new 22% tax rate would still be lower than what Pennsylvania currently charges gambling companies: 36% on sports betting and 54% on online slot machine revenue.
According to Burgos, platforms using event contracts as a type of investment avoid the rules and safeguards meant for places like casinos and sports betting sites.
The two bills address the issue in different ways, but they’ve been progressing simultaneously instead of competing with each other. Burgos shared his licensing plan in March, and Khan followed with a bill focused on conduct in April. Because Khan supports both bills, they could work together if lawmakers decide to pursue both options.
This new plan follows a pattern seen in other recent Pennsylvania laws dealing with new technologies. For example, Governor Shapiro recently announced standards for large data centers that offer financial benefits if certain requirements are met. Past proposals related to cryptocurrency have also focused on specific rules rather than complete bans.
Neither HB 2711 nor HB 2497 has received a committee hearing or vote.
Federal dispute over prediction markets continues
This new plan comes as disagreement continues to build between state and federal officials regarding prediction markets.
In May, Pennsylvania’s gaming regulators informed the federal agency overseeing commodities trading that agreements related to sports events are considered unlawful gambling within the state. They also stated that national exchange platforms operate like illegal, unregulated sportsbooks and aren’t adequately preventing access by individuals under 21.
Pennsylvania has teamed up with 40 other states to ask the CFTC to allow states to continue regulating contracts related to sporting events as part of existing gambling laws.
Federal courts, however, have reached a different conclusion in an important case.
In April, a federal appeals court ruled that federal law regarding commodity exchanges takes priority over state gambling laws when it comes to sports contracts traded on exchanges registered with the Commodity Futures Trading Commission. Specifically, the court decided 2-1 in the case of KalshiEX LLC v. Flaherty that New Jersey couldn’t enforce its gambling laws against Kalshi. This ruling now sets a legal precedent for federal courts in Pennsylvania and surrounding areas.
Judge Jane Roth disagreed with the majority opinion, stating that Kalshi’s contracts were very similar to those offered by DraftKings and FanDuel. She pointed out that this similarity is precisely what Pennsylvania is trying to regulate with its new proposal, which aims to limit how easily these types of bets can be made.
This new proposal comes after similar legal challenges in other states. As crypto.news reported recently, the CFTC is asking a federal court to quickly decide on its case against Minnesota before that state’s ban on prediction markets starts August 1st. The CFTC argues that exchanges regulated by the federal government should be covered by federal commodity laws, not state gambling rules.
The agency also increased its monitoring of event contracts by asking exchanges for details about each specific contract, rather than just general statements they make themselves.
2026-07-28 10:31