The deal is a scholarship agreement which will see Kay stay at the club for two years with the option of a further year.
The 17-year-old has attracted interest from Premiership and Championship clubs following his first ever league appearance back in November when he appeared as a substitute in the Scunthorpe home match.
That appearance made Kay the youngest player ever to appear for Blackpool. He since then went on to hold down a place in the reserve team.
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