Pennsylvania Bill Could Shut Sportsbooks Out of Prediction-Market Making

A liquidity restriction aimed at gambling companies

A bipartisan group of Pennsylvania lawmakers has introduced legislation that could prevent sportsbooks and other gambling companies from acting as liquidity providers or market makers on prediction platforms. House Bill 2711 was introduced July 22 by Rep. Tarik Khan and referred to the House Consumer Protection, Technology and Utilities Committee. It carries 24 sponsors in total – 20 Democrats and four Republicans.

The bill would prohibit a provider from offering a prediction market in Pennsylvania when its liquidity provider or market maker knowingly conducts gaming activity in the ordinary course of business, whether inside or outside the commonwealth. The restriction extends to parents, subsidiaries, affiliates, joint ventures, employees and entities acting for another company’s financial benefit.

Prediction platforms would also be barred from entering contracts or sharing revenue with businesses that ordinarily engage in gaming. The bill does not define “gaming activity” within its new prediction-market chapter, and does not specify how the provisions would apply to platforms affiliated with sportsbook operators, leaving uncertainty over how broadly courts or regulators would apply the restriction.

The provision arrives as traditional betting groups move beyond consumer-facing prediction apps and into the infrastructure underlying their contracts. Draftkings and Flutter have both pursued market-making operations, while Draftkings recently launched its proprietary DKeX exchange after acquiring CFTC-registered Railbird Technologies.

If enacted and applied broadly, HB 2711 could stop sportsbook-controlled market makers from supporting contracts offered to Pennsylvania residents. It could also complicate partnerships in which a prediction exchange shares revenue with a casino, sportsbook or gambling-company affiliate. And, unlike proposals advanced in several other states, it treats prediction markets as an activity to regulate rather than prohibit. This places the liquidity restriction rather than an outright ban at the center of its constraint on gambling operators.

The bill would establish a minimum age of 21 and require platforms to exclude self-excluded users, company employees, settlement-source employees and people possessing inside information. Providers would need commercially reasonable safeguards against fraud, manipulation and the misuse of material nonpublic information. It would also prohibit markets involving high-school sports, sporting events with minor participants, individual health conditions, and what it defines as “death markets” – contracts tied to a person’s death, assassination, attempted killing or mass-casualty events. Athletes, coaches, officials, candidates, campaign workers and others able to influence an outcome could face liability for trading on related contracts.

Because the proposal creates no licensing regime, enforcement falls to the Attorney General, who would receive authority to investigate, impose penalties and shut down platforms operating outside the rules.That distinguishes it from House Bill 2497, introduced May 8 by Rep. Danilo Burgos and co-sponsored by Khan, which sits in the House Gaming Oversight Committee. The earlier bill would require Pennsylvania Gaming Control Board licenses costing $1 million upfront and $1 million annually, impose a 20% tax on gross prediction-wagering revenue plus a 2% local share assessment, and fine unlicensed operators up to $25,000.

The combined 22% rate would sit well below what Pennsylvania already charges its licensed operators, who pay 36% on sports wagering revenue and 54% on online slots – among the highest rates in the country. Burgos has framed the bill around what he calls regulatory arbitrage, arguing platforms claiming to offer financial derivatives rather than gaming products bypass safeguards built for casinos and sportsbooks.

The two measures emerged from parallel tracks rather than as rivals: Burgos circulated a licensing-and-tax memo in March, while Khan filed his insider-trading proposal in late April. Khan co-sponsors both, and contemporaneous coverage has described them as companion measures – HB 2497 treating event contracts as state-regulated wagering, HB 2711 layering conduct and consumer-protection rules on top.

Pennsylvania’s gaming regulator has taken a more confrontational position. The PGCB told the Commodity Futures Trading Commission in May that sports event contracts constitute illegal wagering under state law and accused federally regulated exchanges of operating as unlicensed sportsbooks accessible to people under 21. Pennsylvania also joined a 40-state coalition arguing that sports contracts belong under state gambling oversight.

The Third Circuit ruled 2-1 on April 6 in KalshiEX LLC v. Flaherty that the Commodity Exchange Act preempts state gambling laws as applied to sports event contracts on CFTC-registered exchanges, affirming an injunction that barred New Jersey from enforcing against Kalshi. That precedent binds federal courts in Pennsylvania. In dissent, Judge Jane Roth argued Kalshi’s contracts are “virtually indistinguishable” from products offered by Draftkings and Fanduel – the same overlap HB 2711’s liquidity provision targets from the opposite direction.

Neither Pennsylvania bill has received a committee vote or hearing. HB 2711 nevertheless adds a new fault line to the national fight: states may not only challenge whether prediction markets can operate, but also attempt to separate their trading infrastructure from the gambling companies increasingly seeking to control it.