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A bipartisan group of Pennsylvania lawmakers is taking aim at the fast-growing and largely unregulated world of prediction markets, introducing future legislation that would ban insider trading and impose new safeguards on platforms that allow users to wager on real-world events.
The memo comes as these markets, which can include wagering on elections, economic data, and other outcomes, continue to expand in visibility and controversy, raising questions among policymakers about fairness, consumer protection, and potential misuse of nonpublic information.
In addition, prediction markets also offer markets on sports, which has created tension among regulated Pennsylvania online sportsbooks.
Lawmakers target insider advantage in prediction markets
State Rep. Tarik Khan, D-Philadelphia, announced the proposal last week alongside colleagues from both parties, framing the measure as a necessary step to ensure fairness as these markets grow in popularity.
Khan said in a press release:
“Right now, people with inside information can game the system. We’re seeing more and more insider trading on these new prediction markets, and we won’t tolerate that in Pennsylvania.
“It’s time to put the right guardrails in place. No rigged system for insiders.”
Lawmakers argue that the lack of oversight on prediction markets creates opportunities for abuse, particularly by individuals with privileged or nonpublic information.
In a co-sponsorship memo circulated to House members, Khan and his colleagues warned that “people with inside information can game the system and profit while everyone else loses.
“That is not a fair market. That is a corrupt, rigged system.”
Proposed bill outlines new consumer protections
The proposed legislation would establish restrictions similar to those found in traditional financial markets. Among its key provisions, the bill would prohibit insider trading and market manipulation, require platforms to monitor and report suspicious activity, and ban participation by individuals with conflicts of interest or inside knowledge.
It would also create penalties for violators and empower the Pennsylvania Attorney General and local prosecutors to enforce the law.
Lawmakers pointed to recent federal charges against a US soldier accused of using classified information to profit on prediction market bets as an example of the risks tied to unregulated platforms.
The state is already starting to see the impact of prediction markets. Delaware County has already taken matters into its own hands by prohibiting volunteer election workers from having a financial stake in elections.
Restrictions on certain markets included
Beyond insider trading concerns, the legislation also targets certain types of wagering. It would ban markets tied to death or mass casualty events and restrict wagering on high school sports, which lawmakers described as high risk or unethical.
The memo emphasizes broader consumer protections as well, including measures to keep minors off prediction platforms and prevent “people tied to the outcome from profiting unfairly.”
“Our legislation would bring basic guardrails to these platforms,” the memo states, highlighting provisions such as banning insider participation and “requiring platforms to detect and report suspicious activity.”
Bipartisan support and next steps
Supporters say the bill is not intended to eliminate prediction markets, but to regulate them in line with other industries where financial incentives are tied to real-world outcomes.
The memo states:
“If these platforms are going to operate in Pennsylvania, they should play by the same basic rules as every other market. No insider deals. No cheating.”
The proposal has bipartisan backing, with co-prime sponsors including Reps. Jeremy Shaffer, Danilo Burgos, Roman Kozak, Jim Prokopiak, Jamie Flick, Anthony Bellmon and Ana Tiburcio.
Khan said he is encouraging additional lawmakers to sign on, emphasizing that the issue transcends party lines.
“This is about making sure nobody gets an unfair advantage just because they’re on the inside.”
