North Carolina Sides With Federal Preemption, Taxing Prediction Markets 6% While Sportsbooks Pay 23%

North Carolina has broken with the wave of states fighting prediction markets in court, using its new budget to tax platforms like Kalshi and Polymarket at 6% while explicitly declining to regulate them – a posture that effectively recognizes federal authority over the sector even as other states sue to assert their own. Sportsbooks in the state, by contrast, will now pay 23% in tax.

Key Takeaways

• North Carolina’s signed budget taxes prediction markets at 6% of net trading fee revenue, effective January 1, 2027.
• The state declines to require prediction platforms to hold a state license, recognizing CFTC authority instead.
• Sports betting operators face a separate, higher 23% tax on gross wagering revenue, up from 18%, effective immediately.

A carveout sidestepping a fight

Governor Josh Stein signed North Carolina’s $34 billion fiscal-year budget on July 7, enacting Senate Bill 257 – now Session Law 2026-41 – after more than a year of negotiations. The budget’s two key gambling provisions pull in opposite directions: the first raises the tax on licensed online sports betting from 18% to 23% of gross wagering revenue, effective immediately. The second, taking effect January 1, 2027, imposes a 6% tax on prediction market operators’ net trading fee revenue – and, crucially, does so without bringing those operators under state gaming regulation.

According to gaming analyst Dustin Gouker, writing in his Next Event Horizon newsletter, the measure appears to mark the first time a state has sought to explicitly recognize CFTC-registered prediction markets as lawful under federal authority while declining to impose its own licensing, registration, or other regulatory requirements. Gouker described it as “affirming legislation with a relatively low tax rate” that prediction markets would likely want other states to copy.

Elsewhere, Kentucky enacted a 14.25% excise tax 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 – and Kalshi promptly sued to block it. Where those states have asserted state jurisdiction and met legal challenges, North Carolina has opted to take the revenue while conceding the regulatory question to Washington.

The legal angle is sharply contested across the United States, and federal courts are split. Kalshi has won preliminary injunctions in New Jersey – upheld by the Third Circuit in April – and Tennessee, but has lost in Maryland, Nevada, Arizona, Ohio, and, this week, the Southern District of New York, where Judge Analisa Torres denied its bid to block state enforcement, finding the platform had not shown it was likely to succeed on its federal-preemption argument. The CFTC has separately sued at least nine states – including Kentucky, Rhode Island, and Minnesota, where a federal judge heard arguments this month – to defend its jurisdiction over event contracts. Many observers expect the question to reach the Supreme Court.

Because prediction markets and sportsbooks offer functionally similar products to consumers, opponents argue the 17-percentage-point tax gap amounts to a sweetheart deal that disadvantages licensed, state-regulated operators and the responsible-gaming and consumer-protection rules they must follow. Supporters counter that the structure lets North Carolina capture revenue from a fast-growing sector without duplicating a federal regulator’s role or wading into an unsettled legal fight.