TLDR
- North Carolina formally recognized the CFTC’s exclusive federal authority over prediction markets.
- CFTC-registered platforms can operate in the state without obtaining a separate state gambling license.
- The state will tax operators at 6% of net trading fee revenue starting January 1, 2027.
- North Carolina also increased its sports betting tax from 18% to 23% of gross wagering revenue.
- The legislation separates North Carolina from states seeking to regulate event contracts under gambling laws.
North Carolina has enacted legislation recognizing federal authority over prediction markets and establishing a separate state tax structure. Governor Josh Stein signed Senate Bill 257 on July 7 as part of the state’s 2026 budget. The measure distinguishes federally regulated event contracts from sports wagering under state law.
State Confirms Federal Prediction Market Oversight
Senate Bill 257 states that the Commodity Exchange Act gives the CFTC exclusive authority over prediction markets. Therefore, platforms registered with the federal regulator may operate legally within North Carolina. These companies will not need separate approval from the state’s gambling regulator.
The provision establishes North Carolina as the first state to formally recognize CFTC preemption through legislation. It also creates a defined regulatory route for prediction markets serving residents within the state. Previously, North Carolina maintained no legal framework specifically covering these platforms.
The recognition could affect companies such as Kalshi, which already holds federal registration for its event contracts. Polymarket also operates prediction markets, although it has restricted access for users within the United States. The platform operates through Polygon and gained wider attention during the 2024 presidential election.
North Carolina Adopts Separate Tax Framework
The legislation will tax prediction markets at 6% of net trading fee revenue linked to state residents. This tax will take effect on January 1, 2027, alongside other budget provisions. Before this measure, operators faced only North Carolina’s general corporate income tax of 2.25%.
The state applied a different tax calculation to sports betting companies operating under state-issued licenses. Senate Bill 257 increased their rate from 18% to 23% of gross wagering revenue. That change represents an increase of almost 28% from the previous sports betting tax rate.
The two industries will also pay taxes based on different revenue measures. Sportsbook taxes apply to gross wagering revenue, while taxes on prediction markets apply to net trading fees. The distinction reflects the separate federal and state regulatory systems governing each type of contract.
Other States Pursue Conflicting Rules
North Carolina’s approach differs from policies adopted or proposed in Kentucky, Illinois, and New York. Those states have sought greater authority over prediction markets, especially contracts linked to sporting events. Their actions have also produced legal disputes involving platforms and federal regulators.
Kentucky approved a 14.25% tax on transaction fees and sought to regulate the platforms through state law. The CFTC later filed a complaint challenging Kentucky’s attempt to impose those requirements. Illinois placed event contracts within its sports wagering framework and required operators to obtain state licenses.
Kalshi has challenged Illinois regulations and continues separate litigation against New York authorities. A federal judge recently denied its request to block New York’s gambling law while litigation proceeds. North Carolina’s new law now recognizes federal control over prediction markets and applies the 6% tax from 2027.
