Pennsylvania's lawmakers have put forth a new bill aimed at establishing a regulatory structure for prediction markets, notably without imposing any taxes on the industry. This initiative sets Pennsylvania apart from various other states that have opted to tax these markets or impose restrictions on certain contracts.
House Bill 2711, introduced on July 22 by Representative Tarik Khan along with over twenty co-sponsors, seeks to create a dedicated chapter in Pennsylvania law specifically for prediction markets. The legislation lays out operational standards that cover participation, market integrity, and consumer protection.
The bill outlines several key provisions, including:
- Setting the minimum age for participation at 21.
- Mandating operators to enforce consumer protection measures, such as excluding self-excluded users and employees, as well as individuals with access to nonpublic information.
- Prohibiting contracts related to high school sports or involving minors.
- Restricting markets based on a person’s health status.
- Outlawing 'death markets,' which include contracts linked to an individual’s death or significant tragic events.
Additionally, operators are required to adopt “commercially reasonable and technically feasible” practices to identify fraud, market manipulation, and misuse of confidential information. Unlike some other states' proposals, HB 2711 does not restrict most sports prediction markets.
The bill also aims to delineate prediction markets from conventional gambling operations. It stipulates that providers cannot operate in Pennsylvania if a liquidity provider or market maker is involved in gaming activities as part of their regular business operations. Furthermore, it prohibits certain revenue-sharing and market-making agreements with entities engaged in gaming.
Enforcement of this legislation would fall under the jurisdiction of the Pennsylvania Attorney General and local district attorneys, rather than the Pennsylvania Gaming Control Board. Providers found in violation could face civil penalties and court-ordered injunctions, with fines reaching up to $1 million per day for continued operations after an injunction.
Pennsylvania’s initiative adds to the diverse landscape of state regulations surrounding prediction markets. Minnesota has taken a notably restrictive stance, banning various prediction market operations. Meanwhile, Kentucky and Illinois have opted for a combination of taxation and regulatory measures, with Kentucky imposing a 14.25% tax on online prediction market revenue. North Carolina has implemented a 6% tax on net trading revenue without a specific regulatory framework.