A bipartisan bill introduced in the Pennsylvania legislature would impose insider-trading rules and consumer protections on prediction markets, while also blocking gambling companies from supplying liquidity to those platforms. The measure could disrupt the market-making strategies of DraftKings, Flutter, and other sportsbook operators that have been expanding into federally regulated event contracts.
What the bill does
The proposed legislation would treat prediction-market contracts like securities, requiring platforms to register with the state and follow anti-fraud and insider-trading rules similar to those governing stock exchanges. It would also bar any company licensed to operate a gambling business in Pennsylvania from acting as a liquidity provider for a prediction market. That provision directly targets the model used by some sportsbooks that have begun offering event-based contracts through regulated exchanges.
DraftKings and Flutter, which owns FanDuel, have been among the most aggressive in pushing into prediction markets. They have argued that event contracts on things like election outcomes or economic data are not gambling but a form of investment. The Pennsylvania bill would effectively cut them off from providing the liquidity that makes those markets function. Without a licensed gambling company backing the contracts, the markets could become illiquid or collapse entirely.
Who is behind the bill
The legislation is sponsored by a bipartisan group of state lawmakers who say they are concerned about the lack of oversight in prediction markets. They argue that these markets operate in a gray area, exposing consumers to potential manipulation and fraud. The bill would require platforms to disclose risks and ensure that contracts are not used to circumvent state gambling laws.
What happens next
The bill has been referred to the House Commerce Committee. No hearing date has been set yet. If it passes, Pennsylvania would become the first state to explicitly regulate prediction markets as securities and to ban gambling companies from acting as liquidity providers. The outcome could set a precedent for other states considering similar measures.
