North Carolina has become the first US state to formally recognize federal authority over prediction markets while introducing a state tax through its newly signed budget.
Gov. Josh Stein approved Senate Bill 257 on Tuesday, confirming that federally regulated prediction market operators will be subject to a 6% tax on net trading fee revenue. The legislation also states that companies registered with the Commodity Futures Trading Commission (CFTC) may legally operate in the state under the Commodity Exchange Act, describing the federal agency as having “exclusive” authority over prediction markets.
The same budget increases North Carolina’s online sports betting tax from 18% to 23% of gross wagering revenue. While sportsbooks remain subject to state licensing requirements, prediction market platforms will not face “any license, registration, or other regulatory requirements or obligations of any kind.”
Budget Sets Distinct Policy For Prediction Markets
Lawmakers approved the measure as prediction market platforms continue to expand across the United States.
House Speaker Destin Hall said legislators believed action was necessary.
“A lot of it’s going on in this state anyway, in terms of the prediction markets, and so [it’s] just time to deal with it,” he told reporters last week.
North Carolina Senate leader Phil Berger also commented on the sector’s growth.
“It’s pretty clear that it’s something that seems to be growing both in popularity and in terms of just recognition that it’s out there,” Berger told reporters last week. “Whether it’s something that eventually is going to take over from the sports betting, I don’t know.”
The lower tax rate means prediction market operators will pay less than licensed sportsbooks. A fiscal memo projects the new tax will generate $2 million in 2027. The sports betting tax increase took effect immediately, while the prediction markets tax begins on Jan. 1, 2027.
State Sen. Julie Mayfield criticized the proposal before lawmakers approved the budget.
“I don’t know who their lobbyists are, but congratulations. That’s just rich,” she said.
Court Fights Continue To Shape The Market
North Carolina’s position differs from several other states. Kentucky adopted a 14.25% excise tax on prediction market transaction fees while Attorney General Russell Coleman has pursued enforcement actions that prompted litigation involving the CFTC. Illinois added prediction markets to its sports wagering tax system, leading Kalshi to sue the state. Utah Gov. Spencer Cox has pledged to challenge the CFTC’s position, calling prediction markets “gambling — pure and simple.”
Questions also remain over how North Carolina will implement the new tax, with similar measures in Kentucky and Illinois already triggering legal disputes.
Gaming law attorney Daniel Wallach told the Washington Examiner that conflicting lower court rulings could send the issue to the US Supreme Court as early as 2027, with a decision potentially arriving by mid-2028.
The budget also revises sports betting tax distributions. UNC Chapel Hill and North Carolina State University will now qualify for allocations alongside other UNC System institutions. Revenue also supports youth sports programs, gambling addiction treatment, the state’s general fund, and the Major Events, Games, and Attractions Fund, now capped at $30 million annually.
Source:
“North Carolina becomes first state to legitimize prediction markets”, washingtonexaminer.com, Jul 7, 2026
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