Pennsylvania lawmakers are proposing a new approach to prediction markets that could further complicate the nationwide fight over whether the fast-growing platforms should answer exclusively to federal regulators or remain subject to state consumer protections.
- Pennsylvania’s HB 2711 would allow prediction markets while imposing age restrictions, insider-trading rules and state-level enforcement standards.
- The proposal offers a middle ground between Minnesota’s ban and the CFTC’s claim of exclusive federal authority over regulated exchanges.
- Platforms could face penalties of $1 million per day for continuing to operate after a court-ordered shutdown.
House Bill 2711 would allow prediction markets to continue operating in Pennsylvania while imposing age restrictions, insider-trading prohibitions and state-level enforcement standards. That framework falls between Minnesota’s attempt to ban most event-contract markets and the largely hands-off approach supported by the US Commodity Futures Trading Commission.
The bipartisan proposal introduced earlier this month could become a particularly important test because Pennsylvania falls within the Third Circuit, where a federal appeals court ruled in April that the Commodity Exchange Act preempts state gambling laws as applied to sports contracts offered by CFTC-regulated exchanges.
That 2-1 ruling favored Kalshi in its dispute with New Jersey and represented the first federal appellate decision on whether states may regulate sports event contracts. The court determined that the contracts qualify as “swaps” and therefore fall within the CFTC’s exclusive jurisdiction.
State-level prediction market bills proliferate
The new bill does not directly classify prediction markets as gambling or require platforms to obtain a Pennsylvania gaming license. Instead, it would create a separate set of consumer protection and market-integrity requirements under the state’s amusement statutes. That distinction could give Pennsylvania a different legal argument than states attempting to prohibit sports contracts or regulate them through existing gaming laws.
However, any attempt to enforce the bill against a CFTC-designated contract market would likely invite another preemption challenge.
The proposal comes as states and the federal government increasingly pursue conflicting approaches. The CFTC has asserted exclusive authority over federally regulated exchanges while state regulators argue platforms offering sports contracts have bypassed licensing, taxation, responsible gambling and consumer protection requirements imposed on sportsbooks.
Minnesota enacted the country’s first explicit state-level prediction-market ban in July, though a federal judge temporarily blocked it before its Aug. 1 effective date. The CFTC sued Minnesota, arguing the law unlawfully criminalized participation in federally regulated derivatives markets.
North Carolina and Kentucky have passed bills similar to Pennsylvania’s proposal, with each implementing a tax and state-level regulatory structure for prediction markets while acknowledging federal authority. The major prediction markets have not pursued these measures in court like they have for Minnesota’s ban bill or state regulatory crackdown efforts.
New York Attorney General Letitia James further escalated the nationwide dispute Friday by suing Kalshi for allegedly operating an unlicensed gambling platform. Massachusetts, Michigan, Nevada and Washington have also obtained court orders restricting Kalshi’s activities, all of which are subject to further legal challenges.
Pennsylvania’s proposal signals that states may pursue more targeted restrictions even if courts prevent them from banning prediction markets outright. It also raises the possibility of a fragmented system in which federally regulated platforms face different age, participation and market restrictions in each state.
Pennsylvania prediction market bill details
The legislation would define a prediction market as one allowing users to take speculative positions on future events through a bid-ask format. Platforms would be prohibited from permitting anyone under 21 to open an account or take a position.
If a provider inadvertently allowed an underage user to participate, it would have to suspend the account, close the user’s positions, return the remaining money and prohibit further participation until the user turns 21.
Providers would also have to exclude self-excluded users, company employees, settlement-source employees and anyone possessing inside information. The bill would prohibit athletes, coaches, team and league employees, officials, public officeholders, candidates, campaign workers and others with material nonpublic information or influence over an outcome from trading on related markets.
Platforms would be required to establish “commercially reasonable” measures to detect fraud, manipulation and insider trading. Suspected violations would have to be reported to the Pennsylvania attorney general and, when appropriate, law enforcement.
The bill would also ban contracts involving the health of an individual, death or assassination and sporting events involving minors or high school teams. It would not prohibit contracts on professional or college sports involving adult participants.
The proposal would also prevent platforms from using gaming companies or their affiliates as market makers, liquidity providers or revenue-sharing partners. That provision could complicate partnerships between prediction exchanges and established sportsbook or casino companies.
A platform continuing to operate after a court-ordered shutdown could be fined $1 million per day. The law would take effect 60 days after enactment.
The proposal’s ultimate reach may still depend on the courts.
Further circuit courts are set to rule on similar cases, potentially against the prediction markets, setting up an increasingly likely final Supreme Court decision. In her Third Circuit dissent against the platforms, Judge Jane Richards Roth warned that treating sports contracts as federally protected swaps could extend far beyond prediction markets.
“The question of whether sports-event contracts are swaps is a thorny issue with the potential to radically upend the legal landscape,” Roth wrote.
