Pennsylvania Bill Targets Insider Trading in Event Markets
The most significant feature of the proposal is its handling of market liquidity. A provider could not offer a prediction market in Pennsylvania if a gaming business acts as its liquidity provider or market maker.
The restriction will apply even to affiliates, parent firms, subsidiaries, joint ventures, employees, and agents. Providers would also be barred from offering markets involving a contract or revenue-sharing arrangement with a gaming business.
This results in the creation of a distinction between prediction markets and the existing betting industry.
Bill Enters Committee Review
The bill is sponsored by Tarik Khan with a bipartisan set of co-sponsors. The bill was referred to the House Consumer Protection, Technology and Utilities Committee on July 22.
It does not yet have a vote or committee hearing. The bill would add a new Chapter 20 on prediction markets to Pennsylvania’s Title 4, which covers amusements. This will include definitions for platforms, speculative position, market maker, settlement source, and material nonpublic information.
Access and Insider Rules
Only persons age 21 or above would be allowed to open accounts. If a platform finds an underage user account, the platform will be forced to shut off access, shut down all open positions, repay any remaining money, and prevent any further involvement until the customer becomes 21.
Platforms would need exclusion policies for the following groups:
- Self-excluded users;
- Officers, directors, employees, or agents of the provider or its affiliated companies;
- Officers, directors, employees, or agents of entities that provide information used to determine market outcomes;
- Individuals with insider information about a particular market.
Separate liability provisions would cover people who trade using inside information or who can influence a market outcome. This group includes athletes, coaches, public officials, political candidates, and campaign staff.
Providers would have to implement commercially reasonable and technically feasible measures to detect and prevent fraud, manipulation, and the misuse of material nonpublic information.
Sensitive Contracts Would Be Blocked
HB 2711 would prohibit contracts related to high school athletics or events that involve minors. Also banned are markets relating to one’s health condition.
Another ban prohibits contracts related to death, assassination, attempted killing, and mass casualty events.
Penalties Reach $1 Million per Day
Regarding penalties, the bill proposes the following:
- For violations, civil fines up to $10,000 could be imposed;
- For a continuing pattern of violation, the fine could rise to $50,000;
- Some breaches would carry a penalty equal to at least $50,000 or twice the profit involved;
- A provider that continues operating after a court injunction could be fined $1 million for every day it remains active.
If enacted, the legislation would take effect 60 days later.
What to Watch Next
The bill is still at an early stage, so its scope may change. Its sharpest commercial effect would come from the proposed firewall around gaming companies. That clause could shape who supplies liquidity, makes markets, and shares in prediction-market revenue if Pennsylvania moves the measure forward.