While some states are moving to ban prediction market platforms, Pennsylvania lawmakers are proposing to cash in on the craze. A new bill would charge companies $1 million to obtain an event wagering license and require them to pay 20% of revenue generated in state taxes.
Twelve Democrats are sponsoring House Bill 2497, which was introduced in Pennsylvania on Friday. It would regulate prediction markets in a similar way to sports betting, but at a lower cost. Currently, sportsbooks pay a $10 million licensing fee and a 36% tax on revenue to the state.
The bill proposes giving the Pennsylvania Gaming Control Board regulatory authority over prediction markets, as it does for sports betting and casinos.
Bill Includes New Age Limit & Market Restrictions
In addition to the fees, the bill would limit participation in prediction markets to individuals aged 21 or older. This would bring it in line with the state’s legal gambling age.
The legislation would also allow the Board to restrict certain markets relating to “sensitive matters,” including elections, military conflicts, judicial rulings, and natural disasters.
Individuals are also prohibited from wagering at prediction markets for the purpose of money laundering, insider trading, or profiting from nonpublic information.
Users may not use “nonpublic information that the individual has acquired as a result of the individual’s employment, position or social or business connections, or otherwise, to achieve a financial or other benefit.”
Last week, political campaign staffers admitted to using nonpublic poll data to place wagers on prediction markets. Under the bill’s terms, this would be illegal.
Insider Trading Scandals Prompt Lawmakers to Intervene
One of the bill’s sponsors, Rep. Tarik Khan, said he was motivated to regulate the industry following high-profile insider trading scandals, such as the case of a U.S. special forces soldier who won $400,000 betting on the capture of Nicolas Maduro in Venezuela.
“We have a duty to make sure that these markets are legit and that people are not getting scammed,” Khan said. “To think that people that have inside information — people in power — are able to game this system and make millions off the backs of people that are trying to do it the honest way — it’s a problem.”
The bill would also ban betting on high school sports, which Khan said is “common sense.”
“There’s just too much of a risk of corrupting and adulterating the purity of these sports,” he said. “That’s a problem.”
Regulation or Prohibition?
While the bill contains some restrictions on prediction markets, it is largely aimed at regulating the industry rather than prohibiting it. Importantly, it does not restrict platforms from offering sports markets, except for high school events.
It is a different strategy from many other states. In Minnesota, lawmakers are advancing a bill proposing to ban sports prediction markets, mention markets, and election wagering.
Legal battles between state regulators and prediction markets are also ongoing in at least 16 states. The Commodity Futures Trading Commission (CFTC) is aggressively defending its licensed operators, filing lawsuits in New York, Arizona, Connecticut, and Illinois.
With the organization claiming exclusive jurisdiction over the industry, it is unlikely to view Pennsylvania’s legislation favorably and would likely challenge the state’s ability to implement the proposed measures if the bill passes.
