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State Rep. Tarik Khan, D-Philadelphia, has garnered bipartisan support to introduce House Bill 2711, which aims to ban insider trading and implement consumer protections for prediction markets.
Prediction markets across the country have been offering sports-related contracts, similar to Pennsylvania sportsbooks. However, prediction markets are federally regulated and are not subject to the same procedures as legal sports wagering sites.
Khan delivered on the promises that were in his memo back in May, which addresses the insider trading and consumer protection concerns. The bill has been referred to the Consumer Protection, Technology and Utilities committee.
What the bill targets
HB 2711 would add a new Chapter 20, “Prediction Markets,” to Title 4 of the Pennsylvania Consolidated Statutes. It’s the same title that governs the state’s casino and gaming industry.
While the bill addresses several matters, Khan made it a point to target insider trading. The bill states:
“No person shall, directly or indirectly, knowingly or recklessly, use material nonpublic information or engage in fraudulent or manipulative conduct to obtain a financial benefit through a prediction market.”
Khan added that platforms must detect and report suspicious activity to the Attorney General and law enforcement.
In addition, Khan put safeguards in place protecting individuals from using the platforms. The following people would be banned from using prediction markets:
- Anyone under 21-years-old
- Self-excluded individuals
- Platform insiders
- People tied to market outcomes
The bill also adds that death markets, health-status markets, and youth/high school sports markets would be banned.
Penalties and what’s next
Should a prediction market operator not comply, Khan has established a penalty framework:
“A provider that violates this chapter, or a regulation, rule or order adopted under this chapter, shall be liable for a civil penalty not to exceed $10,000 for each violation.
“If a court of competent jurisdiction determines that the provider has engaged in persistent course of conduct in violation of this chapter, the court may impose a civil penalty not to exceed $50,000 for each violation.”
The Attorney General can also seek an injunction forcing a platform to cease PA operations. The operator would be subject to a $1 million fine for each day it is noncompliant.
Prediction markets have caused a huge stir not only in Pennsylvania, but across the country. Khan has bipartisan support to rein in these operators who have flooded the state.
Rep. Danilo Burgos, also a co-sponsor of Khan’s bill, has separately introduced legislation that would regulate prediction markets in PA. He also included consumer protections and even a tax framework of 20% for the operators.
It took Khan roughly three months to introduce the bill, in which Burgos is a co-sponsor. The bill now awaits action in the Consumer Protection, Technology and Utilities committee.
