BILL NUMBER: S9414
SPONSOR: ADDABBO
 
TITLE OF BILL:
An act to amend the general business law and the racing, pari-mutuel
wagering and breeding law, in relation to prediction markets
 
PURPOSE OR GENERAL IDEA OF BILL:
Authorizes the Office of the Attorney General to promulgate rules and
regulations on prediction market platforms.
 
SUMMARY OF PROVISIONS:
Section 1:
§ 1800: Short title. § 1801: Definitions.
§ 1802: Age restrictions. Prohibits users under the age of twenty-one
from participating in prediction markets.
§ 1803: Exclusions from participation. Defines who is prohibited from
using prediction market platforms, including but not limited to persons
with insider knowledge on a particular prediction market, any agent of
an affiliated company or settlement provider, and persons that have
self-excluded from using such platforms.
§ 1804: Certain markets prohibited. Prohibits prediction markets from
offering speculative positions on political markets, death markets,
catastrophic events, security events and sporting events.
§ 1805: Settlement sources. Requires prediction markets to disclose
where they received their settlement sources and requires that settle-
ment information is available for consumers to access. Additionally,
this section prohibits providers from settling markets based on confi-
dential or propriety information.
§ 1806: At-risk trading measures. Requires prediction markets to imple-
ment consumer and at-risk trading safeguards such as self-exclusion
procedures, voluntary wagering or time limits, and problem gambling
hotline disclosures. Additionally, this section requires providers to
implement training for employees to recognize and address at-risk trad-
ing.
§ 1807: Advertising restrictions. Establishes rules for advertising such
as prohibiting false and misleading advertising, requiring the NY prob-
lem gambling hotline be included in advertisements and clearly disclos-
ing terms and conditions associated with any bonus, free credits and
referral rewards.
§ 1808: Restrictions on credit-based products and gift certificates.
Bans platforms from selling gift certificates related to their platforms
and prohibits platforms from accepting credit cards or credit products
to deposit additional funds on their platforms.
§ 1809: Restrictions on market making. Forbids prediction market provid-
ers from offering markets that involve, directly or indirectly, any
person or entity engaged in gaming activities, whether as a liquidity
provider, market maker, or revenue partner, including their affiliates,
subsidiaries, or agents.
§ 1810: Certain contract provisions void. Prohibits a platform from
altering or eliminating their terms and conditions in a way that would
violate this article. Terms and conditions that violate this article are
void.
§ 1811: Insider trading and market manipulation. Requires platforms to
develop mechanisms that detect and prevent insider trading and report
such activity to the Attorney General and law enforcement where appro-
priate. §
§ 1812: Penalties. Establishes penalties for any violation of this arti-
cle. § 1813: Rulemaking authority. Authorizes the Attorney General to
promulgate rules and regulations.
Section 2:
913: Definitions
913(2): Amends the racing, pari-mutuel wagering, and breeding law to
provide the commissioner of gaming with jurisdiction over entities who
have licenses within the state to penalize such entities for engaging in
prediction market activities
913(3): Provides for penalties Or attorney
913(4): Permits enforcement concurrently with the state police general
for concurrent violations of the law.
Section 3: Severability clause. Section 4: Effective Date.
 
DIFFERENCE BETWEEN ORIGINAL AND AMENDED:
1. Makes technical amendments to various sections of the bill.
2. Provides concurrent enforcement mechanisms between the attorney
general and the commissioner of gaming.
3. Provides the commissioner of gaming with the ability to penalize
licensed wagering entities who engage in prediction market activities.
4. Amends the terms "problem gambling" to "at-risk trading".
5. Adjusts the definition of "prediction market platform".
 
JUSTIFICATION:
Like the pre-flipper pinball machines, sweepstakes cafes, sweepstakes
gambling, and many other schemes that preceded it, prediction markets
have rebranded old-fashioned wagering as "trading," inviting the public
to buy and sell positions on real-world events with an expected payoff.
These range from who wins an election, how a court rules, how destruc-
tive a natural disaster will be, even whether someone lives or dies. Yet
whatever wrapper prediction markets are placed in does not change the
substance. The constant throughline throughout history is simple: when a
product hits the three classic elements - consideration, prize, and
chance- states can treat it as gambling regardless of the label. Predic-
tion markets are the latest wrapper.
These prediction market products that are bets sold to consumers have
consequences that can flow from them which are immense. For instance,
insiders can trade on embargoed information and entire markets can be
influenced by a single actor. It turns everyday people into insiders who
can, if they choose, profit from their knowledge. We are already seeing
large, last-minute positions placed just before announcements and "one-
person" markets where the subject effectively controls the result. For
example, markets such as "What will (x) say during their speech?" or
"How many tweets will (x) make in the next month?"
A major part of the State's legitimate interest is to protect the integ-
rity of its own regulatory framework. Our wagering laws and licenses are
designed to provide a system that is supervised and accountable. If
large national platforms can sidestep that system by offering the same
or a broader array of bets to our residents without a license or state-
level consumer protections, then our licensing regime becomes practical-
ly meaningless. Sports wagering volume on regulated platforms has been
rapidly overshadowed by volume on prediction markets who offer the same
bets. This sort of regulatory arbitrage undercuts compliant in-state
operators and deprives the public of responsible-gaming safeguards that
the state government and problem gambling groups have identified as
necessary for consumers.
Certain categories of bets are flatly contrary to public policy. Wagers
on elections commoditize public office, incentivize misconduct, and
corrode confidence in democratic outcomes. Bets on, crime, terrorism,
war, disease, natural disasters, or death turn human suffering into a
profit center and create harmful incentives. Markets tied to individual
mortality are perverse, and markets tied to fluctuations in specific
securities or financial indices invite manipulation and destabilize
confidence in legitimate financial systems. Markets on pending judicial,
regulatory, or law-enforcement actions undermine institutional independ-
ence and invite exploitation by those with inside roles.
The State not only can regulate these markets, but it must. Regulating
gambling, contracts, and unfair or deceptive practices lies at the core
of state police powers to protect health, safety, and welfare. Offering
bets to residents, however they are called, falls squarely within that
authority. Federal commodities laws do not convert public wagering on
news, elections, or disasters into federally protected "financial
products," nor do they strip states of their historic authority over
gambling and consumer protection. Courts have recognized as much. The
fact that these markets are not based on a financial or economic inter-
est, and that they are self-certified and listed rarely without CFTC
intervention is highly suspect.
This bill does not outlaw innovation. It prohibits predatory and poli-
cy-offensive markets. It protects consumers, preserves election and
market integrity, and ensures our states' licensing system actually
means something. It ensures that it means something not just for opera-
tors who play by the rules, but for the residents those rules are meant
to protect.
 
PRIOR LEGISLATIVE HISTORY:
None.
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
 
EFFECTIVE DATE:
This act shall take effect one year after.it shall have become law.