Pennsylvania Bill Would Regulate Prediction Markets, Allow Sports Contracts

^{Tarik Khan, a Democratic Pennsylvania State Representative, is looking to regulate prediction market platforms in his state with House Bill 2711. (Photo: courtesy of PA House of Reps)}

A new bill introduced by a Pennsylvania lawmaker last week would establish regulations for prediction markets in the state, rather than banning them outright.

The legislation, known as House Bill 2711, was introduced by State Rep. Tarik Khan (D-Philadelphia). The bill currently has 24 co-sponsors, including four Republicans.

If the bill goes through, it would introduce a slew of regulations applicable to prediction markets like Kalshi and Polymarket. It would also build a licensing framework that prediction market platforms would need to apply for in order to operate in the state.

Bill Would Exclude Gaming Operators, Require Safeguards

The bill’s regulations are wide-ranging. They include establishing a minimum user age of 21, mirroring those required at Pennsylvania’s casinos and iGaming sites. It would also require prediction markets to offer some of the same responsible gambling tools available in the gaming industry, including a self-exclusion list.

HB 2711 would prohibit any markets based on high school sports, minors, or those that involve the health status of individuals or deaths. Perhaps the most significant prohibition would be on companies that engage in other gaming activities, as those firms would not be able to also run a prediction market platform in the state.

The move is the latest tactic by state officials seeking to take action against prediction markets in one manner or another.

Prediction Markets Rejecting State Regulation in Any Form

For many states around the country, like New Mexico, Nevada, and Michigan, that have meant lawsuits against the likes of Kalshi and Polymarket. States have argued that by offering sports-based contracts, these platforms are violating their jurisdictions' gambling regulations. On the other hand, the prediction markets and the Commodity Futures Trading Commission (CFTC) claim that only the CFTC has the right to regulate the platforms under federal law.

Those legal battles have resulted in wins for both sides. With conflicting resolutions in state and federal courts across the country, it’s likely that the jurisdictional issues will eventually end up in the Supreme Court. 

Other states, including North Carolina and Illinois, have passed laws that are looking to tax prediction markets rather than ban them. New Jersey lawmakers have introduced a similar bill that would place a 9% tax on prediction market income, with some versions imposing even higher taxes on sports contracts.

But it’s unclear if any of these efforts will go unchallenged by the prediction market industry or federal officials. When Kentucky imposed a 14.25% tax on prediction market transaction fees, the Coalition for Fair Markets – a group representing prediction markets including Kalshi, Polymarket, and Crypto.com – filed a challenge, arguing that the tax was unconstitutional, discriminatory, and preempted by federal laws and regulations. The CFTC also filed a lawsuit in Kentucky challenging the state’s own lawsuits against Kalshi and Polymarket.