North Carolina Governor Josh Stein signed Senate Bill 257 into law on July 7, enacting a $34 billion fiscal-year budget that establishes a 6% tax on prediction market operators' net trading fee revenue effective January 1, 2027, while immediately raising the tax on licensed online sports betting from 18% to 23% of gross wagering revenue. The legislation explicitly recognizes CFTC-registered prediction markets as lawful under federal authority without requiring state licensing or registration. The dual-tax approach arrives as federal courts remain split on whether states can regulate CFTC-overseen prediction markets, with Kalshi securing preliminary injunctions in New Jersey and Tennessee but losing challenges in Maryland, Nevada, Arizona, Ohio, and New York this week.
North Carolina Imposes 6% Prediction Market Tax Without State Licensing Requirement
Senate Bill 257 -- now Session Law 2026-41 -- applies a 6% tax on prediction market operators' net trading fee revenue starting January 1, 2027, while declining to bring those operators under state gaming regulation. Gaming analyst Dustin Gouker, writing in his Next Event Horizon newsletter, described the measure as 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. The legislation contrasts with Kentucky's April enactment of a 14.25% excise tax paired with enforcement actions, and Illinois's June passage of a tax that folds prediction markets into its state sports-wagering regulatory scheme.
State Recognizes CFTC Authority While Sports Betting Faces 23% Rate
The budget's sports betting provision raises the tax on licensed online sports betting from 18% to 23% of gross wagering revenue, effective immediately. The 17-percentage-point gap between the two tax rates has drawn criticism from opponents who argue it 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 prediction markets without duplicating a federal regulator's role or entering an unsettled legal fight over jurisdiction.
Federal Courts Split on Prediction Market Jurisdiction Across Nine States
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 the Southern District of New York, where Judge Analisa Torres denied its bid to block state enforcement this week, 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.
FAQ
What tax rate did North Carolina impose on prediction markets?
North Carolina imposed a 6% tax on prediction market operators' net trading fee revenue, effective January 1, 2027, under Senate Bill 257 signed by Governor Josh Stein on July 7.
Why does North Carolina tax sports betting at a higher rate than prediction markets?
The state raised the tax on licensed online sports betting from 18% to 23% of gross wagering revenue, effective immediately, while prediction markets pay 6% on net trading fee revenue. The legislation recognizes CFTC-registered prediction markets as lawful under federal authority without requiring state licensing, creating a 17-percentage-point tax gap that opponents argue disadvantages state-regulated sportsbooks.
Which states have challenged prediction market operators in court?
Kalshi secured preliminary injunctions in New Jersey and Tennessee but lost challenges in Maryland, Nevada, Arizona, Ohio, and New York this week. The CFTC has sued at least nine states including Kentucky, Rhode Island, and Minnesota to defend its jurisdiction over event contracts.
