The Council on Compulsive Gambling of Pennsylvania and the Pennsylvania Gaming Control Board (PGCB) both provided testimony Tuesday to the state's House Gaming Oversight Committee about the urgent need for the General Assembly to take action on contentious prediction markets.

Prediction markets make it easier to buy and sell shares on a variety of event outcomes, such as binary yes/no contracts and sports. Across the nation, state lawmakers, attorneys general, and gaming authorities have deemed prediction markets—more especially, those that provide contracts for sporting events—to be unlawful gambling.

The Council on Compulsive Gambling of Pennsylvania's executive director, Josh Ercole, believes the recent explosion of prediction markets has resulted in a surge of intake calls for his organization. According to him, the age group of 18 to 24 years old accounted for the largest number of calls to 1-800-GAMBLER in November for the first time ever.

The 30- to 40-year-old age group has consistently accounted for the largest number of calls, according to the responsible gaming advocate.

"We are in a completely different world,” Ercole declared.

“Unlike Pennsylvania Gaming Control Board-licensed operators, these prediction market platforms are not required to provide the robust number of consumer protection tools that are mandated by state legislation. Because they’re identified as financial instruments [by the US Commodity Futures Trading Commission], the minimum age to participate is often 18,” Ercole continued.

"[Prediction markets] expose a highly vulnerable demographic to an activity that has inherent risks associated with it,” Ercole added. “Over the past several years, we have seen a dramatic increase in the number of younger folks contacting the helpline.”

The National Council on Problem Gambling's official Pennsylvania affiliate is Ercole's Council on Compulsive Gambling of Pennsylvania. The council advocates for the creation and extension of comprehensive programs to assist problem gamblers, but it does not endorse or condemn gambling.

The Chief Gaming Regulator Provides Evidence

According to testimony by PGCB Chair Kevin O'Toole, prediction markets pose a danger to the integrity of the heavily regulated gaming sector in the Commonwealth.

“Prediction markets or event contracts are a contemporary evolution of a very old tool. We readily acknowledge the historical and legitimate use of futures markets for commodities trading, a process designed for risk management, allowing producers, consumers, and businesses to hedge against the volatile future price of agricultural products, metals, and energy,” O’Toole said. “However, the nature, scope, and scale of these new platforms have shifted dramatically.”

Operators such as Kalshi and Polymarket, according to the PGCB chair, have taken derivative trading and hedging "far beyond" its historical scope, thereby enabling high-volume wagering "that operates entirely outside of Pennsylvania's comprehensive consumer protection, responsible gaming, and tax framework."

The chair said in closing that the commonwealth's prediction markets had created a "dual-track system," with one track being heavily regulated and the other being the "wild west."

"The Board’s position, consistent with warnings we have delivered to federal authorities, is that these markets are deeply problematic,” O’Toole continued, before handing the presentation to Steve Cook, the PGCB’s chief counsel.

Citing Commodity Futures Trading Commission (CFTC) licenses for Derivatives Clearing Organizations and Designated Contract Markets, prediction markets assert that their operations are legitimate under federal supervision.

"The CFTC has failed to enforce the Commodity Exchange Act’s prohibition on futures trading in the area of gaming,” said Cook. “We’re observing a form of regulatory arbitrage, where federal preemption is stretched beyond its intended purpose to shield operators from state police powers.”

When the legislature meets in January, several members of the House Gaming Oversight Committee are expected to take action after hearing the testimony.