Imagine a sportsbook wanting to help run a prediction market by providing the money needed to make trades smoother. Now, Pennsylvania lawmakers want to block that exact arrangement. A new bipartisan bill, introduced on July 22 by Representative Tarik Khan and co-sponsored by 24 lawmakers, aims to stop gambling companies from acting as market makers or liquidity providers for prediction markets within the state.
The bill, House Bill 2711, doesn't create a licensing system like some expected. Instead, it focuses on setting insider trading rules, consumer protections, and age limits for prediction market platforms. The key feature is a ban on companies involved in ordinary gaming activities from also supplying liquidity or market-making services to these markets. This ban extends beyond just the direct companies to their subsidiaries, affiliates, and employees.
The legislation doesn’t clearly define "gaming activity" in this context, which leaves many questions unanswered. For example, how this rule will apply to exchanges connected to sportsbook operators remains vague, making it uncertain how regulators or courts will interpret the law if it passes.
This move comes as sportsbooks like DraftKings and Flutter expand their reach beyond traditional sports betting. DraftKings recently rolled out its own DKeX exchange after buying Railbird Technologies, which is registered with the Commodity Futures Trading Commission (CFTC). Both companies have been exploring market-making roles linked to prediction markets, stepping into a gray area of regulation.
If Pennsylvania interprets the bill broadly, it could shut sportsbooks out of providing liquidity to prediction contracts available to residents, potentially reshaping how these markets function locally. Meanwhile, another separate bill is pushing for prediction market operators to get state licenses and pay a hefty 22% tax on their earnings, introducing yet more layers of regulation.
Neither bill has yet moved forward with committee hearings or votes. But the developments highlight growing tensions between state gambling laws and the evolving world of prediction markets, especially as companies push into new territory beyond traditional betting. The outcome could impact not only the companies involved but also consumers who participate in these markets.
