Pennsylvania Bill Could Shut Sportsbooks Out of Prediction-Market Making

A bipartisan group of Pennsylvania lawmakers has introduced House Bill 2711, which would impose insider-trading rules and consumer protections on prediction markets while blocking gambling companies from serving as liquidity providers or market makers. The bill, introduced July 22 by Rep. Tarik Khan, carries 24 sponsors and targets sportsbook operators such as DraftKings and Flutter that are expanding into federally regulated event contracts.

The legislation would prohibit a prediction market provider from operating in Pennsylvania if its liquidity provider or market maker knowingly engages in gaming activity. This restriction extends to parents, subsidiaries, affiliates, and joint ventures. Platforms would also be barred from sharing revenue with businesses that ordinarily conduct gaming. The bill does not define “gaming activity” within its new prediction-market chapter, leaving uncertainty over how broadly the restriction would apply.

HB 2711 establishes a minimum age of 21 and requires platforms to exclude self-excluded users, company employees, and those with inside information. Providers must implement safeguards against fraud, manipulation, and misuse of material nonpublic information. The bill also prohibits markets involving high-school sports, events with minor participants, individual health conditions, and “death markets” tied to assassinations or mass-casualty events. Athletes, coaches, officials, and candidates could face liability for trading on related contracts.

Since the bill creates no licensing regime, enforcement falls to the Pennsylvania Attorney General, who can investigate, impose penalties, and shut down non-compliant platforms. This contrasts with a companion bill, HB 2497, introduced by Rep. Danilo Burgos, which would require $1 million upfront and annual licenses from the Pennsylvania Gaming Control Board, impose a 20% tax on gross prediction-wagering revenue plus a 2% local share, and fine unlicensed operators up to $25,000. The combined 22% rate is well below Pennsylvania’s existing sports wagering tax of 36% and online slots tax of 54%.

The two bills emerged from parallel tracks: HB 2497 treats event contracts as state-regulated wagering, while HB 2711 layers conduct and consumer-protection rules on top. The Pennsylvania Gaming Control Board has taken a confrontational stance, telling the Commodity Futures Trading Commission in May that sports event contracts constitute illegal wagering under state law. Pennsylvania also joined a 40-state coalition arguing that sports contracts belong under state gambling oversight.

A recent Third Circuit ruling in KalshiEX LLC v. Flaherty found that the Commodity Exchange Act preempts state gambling laws for sports event contracts on CFTC-registered exchanges, binding federal courts in Pennsylvania. However, a dissenting judge argued Kalshi’s contracts are “virtually indistinguishable” from products offered by DraftKings and FanDuel, highlighting the overlap HB 2711 targets.

Neither bill has received a committee vote or hearing. HB 2711 adds a new dimension to the national debate, as states may not only challenge whether prediction markets can operate but also attempt to separate their trading infrastructure from the gambling companies increasingly seeking to control it.

Source: https://news.bitcoin.com/pennsylvania-bill-could-shut-sportsbooks-out-of-prediction-market-making/