Lawmakers in Pennsylvania are evaluating a new legislative proposal aimed at creating a regulatory structure for prediction market platforms like Kalshi and Polymarket, while still allowing sports event contracts.
Introduced by Rep. Tarik Khan, the bill, known as HB 2711, reflects the varied approaches states are taking towards exchanges overseen by the Commodity Futures Trading Commission (CFTC).
This bipartisan initiative has garnered support from 24 members of the House, including 20 Democrats and four Republicans. The bill is currently under review by the Consumer Protection, Technology & Utilities Committee.
HB 2711 stipulates that participants in prediction markets must be at least 21 years old and mandates consumer protection measures similar to those found in sports betting regulations. Market providers will be required to implement self-exclusion programs, monitor for potential market manipulation by employees with access to confidential information, and report any suspected insider trading to the state.
The proposed legislation explicitly prohibits contracts related to high school sports or any events involving minors. Additionally, it bans markets that pertain to an individual's health or death, including topics such as assassinations and mass casualty events. Notably, contracts for sports events are not included in this prohibition.
Furthermore, the bill specifies that a provider cannot operate a prediction market in Pennsylvania if they engage in gaming activities as part of their regular business operations, potentially impacting companies like DraftKings and FanDuel, which are licensed sportsbook operators in the state.
If passed, HB 2711 would empower Pennsylvania to impose civil penalties for any breaches of the proposed regulations. Providers could face fines of up to $10,000 for each violation, while repeated offenses related to market making or trading on nonpublic information could incur penalties of $50,000.
For individual liability violations, fines could exceed $50,000 or be twice the amount of profits gained or losses avoided. The Pennsylvania attorney general would also have the authority to seek court orders against operators with multiple violations, and those who continue to operate in defiance of such orders could face daily fines of $1 million.
This legislative approach contrasts with actions taken in other states, where some have attempted to ban prediction markets or impose trading taxes despite CFTC oversight. For example, North Carolina recently enacted a 6% tax on prediction market operators while allowing them to offer sports contracts without a state license. Similarly, Illinois has approved a tax on these operators through its state budget.
Kalshi, Polymarket, and other prediction market platforms are currently involved in various lawsuits against states that have legalized sports betting.