North Carolina Taxes Prediction Markets at 6%, Recognizes Federal Authority Over State Regulation
North Carolina has taken a unique stance on prediction markets, opting to tax platforms like Kalshi and Polymarket at 6% of net trading fee revenue without imposing state licensing or regulation. This approach, enacted in the state’s $34 billion fiscal-year budget signed by Governor Josh Stein on July 7, effectively recognizes federal authority over the sector, in contrast to other states that are actively fighting in court to assert their own jurisdiction.
The budget, Senate Bill 257 (now Session Law 2026-41), includes two key gambling provisions that move in opposite directions. Effective immediately, the tax on licensed online sports betting rises from 18% to 23% of gross wagering revenue. Starting January 1, 2027, prediction market operators face a 6% tax on net trading fee revenue, but critically, they are not required to obtain a state license or adhere to state gaming regulations.
According to gaming analyst Dustin Gouker, this marks the first time a state has explicitly recognized CFTC-registered prediction markets as lawful under federal authority while declining to impose its own regulatory requirements. He described it as “affirming legislation with a relatively low tax rate” that other states may want to replicate.
This approach contrasts sharply with other states. Kentucky enacted a 14.25% excise tax on prediction markets in April and paired it with enforcement actions, drawing a lawsuit from the CFTC. Illinois passed a tax in June that folds prediction markets into its state sports-wagering regulatory scheme, prompting a lawsuit from Kalshi. While those states assert state jurisdiction and face legal challenges, North Carolina has chosen to collect revenue while deferring regulatory authority to Washington.
The legal landscape for prediction markets remains highly contested across the United States, with federal courts split on the issue. Kalshi has won preliminary injunctions in New Jersey and Tennessee but has lost in Maryland, Nevada, Arizona, Ohio, and most recently in the Southern District of New York. The CFTC has separately sued at least nine states to defend its jurisdiction over event contracts. Many observers expect the question to ultimately reach the Supreme Court.
The 17-percentage-point gap between the tax rates for prediction markets (6%) and sportsbooks (23%) has drawn criticism. Opponents argue this gives prediction markets an unfair advantage, as licensed sportsbooks must comply with responsible-gaming and consumer-protection rules. Supporters counter that the approach allows North Carolina to generate revenue from a fast-growing sector without duplicating federal regulatory efforts or entering an unsettled legal fight.