North Carolina could become the first state in the country to formally authorize prediction market companies — and at a tax rate that has sports betting operators and state revenue watchdogs alarmed.
Buried on page 626 of the state’s 634-page budget bill is a provision that would legalize companies like Polymarket and Kalshi to operate in NC and subject them to a 6% tax on net revenues. For context: the same budget raises the sports betting tax rate from 18% to 23%. Sportsbooks also pay a $1 million licensing fee to operate. Prediction market companies would pay no licensing fee and face zero state-level regulations under the current language.
The budget passed both chambers of the legislature by Thursday with little public debate, and now awaits action from Democratic Governor Josh Stein, who can sign it, veto it, or let it become law without his signature.
What is a prediction market?
Prediction markets let users buy and sell contracts tied to real-world outcomes — not just sports results, but also political events, economic indicators, and financial developments. Kalshi and Polymarket have recently offered contracts on outcomes like:
- World Cup match results
- U.S. tariff rates on China
- Whether the U.S. will sign a nuclear deal with Iran
- Which team LeBron James will sign with in NBA free agency
- IPO timing for major tech companies
Crucially, federal law does not classify these companies as gambling operators. The Commodity Futures Trading Commission (CFTC) regulates them as futures markets — the same regulatory framework that governs oil futures and agricultural commodity contracts. That federal classification is why states have generally struggled to apply gambling laws to them.
The tax gap is the story
The numbers tell the stakes plainly:
| Sports betting | Prediction markets (proposed) | |
|---|---|---|
| Tax rate | 23% (raised from 18% in this budget) | 6% |
| License fee | $1,000,000 | None |
| State regulations | Extensive (NCSLC oversight) | None proposed |
| Federal oversight | State lottery commission + federal | CFTC only |
Senate leader Phil Berger acknowledged the competitive threat but framed it as inevitable. “Whether it’s something that eventually is going to take over from the sports betting, I don’t know,” he told reporters. House Speaker Destin Hall argued that North Carolinians are already using these platforms, so “it was just time to deal with it.”
Could sportsbooks rebrand to avoid taxes?
The concern raising the most alarm among critics: nothing in the current budget language prevents sports betting companies from restructuring themselves as prediction market operators to cut their tax bill by 17 percentage points.
“The revenue that we’ve been getting from sports betting, it’s going to plummet,” Sen. Julie Mayfield, D-Buncombe, warned after the budget vote.
NC has collected more than $287 million from sports betting since online wagering launched in March 2024. That money flows to the state’s general fund and to university athletic programs. The new budget also grants UNC-Chapel Hill and NC State University up to $5.8 million each per year from sports betting proceeds — a provision that could be undermined if the market migrates to lightly taxed prediction market platforms.
The regulatory asymmetry argument
Mick Mulvaney — President Trump’s former chief of staff and now director of consumer advocacy group Gambling Is Not Investing — offered the sharpest critique: “Prediction markets are unlicensed sports gambling apps — full stop. The proposed North Carolina budget legitimizes and gives a sweetheart deal to the same prediction market operators that are trampling on the state’s gambling regulations while opening a pathway for underage users to gamble on sports through prediction markets.”
North Carolina had previously taken the opposite position. Democratic Attorney General Jeff Jackson joined a 41-state coalition brief arguing that prediction markets “are contrary to the public interest” and calling for stricter federal regulation. Jackson’s office declined to comment on the new budget provision.
What this means for NC sports bettors
If the budget becomes law, the immediate impact on NC sportsbooks is likely limited — Kalshi and Polymarket operate under different mechanics than traditional sportsbooks and won’t directly replace a DraftKings or FanDuel overnight. But the competitive dynamic shifts:
- More options: bettors gain legal access to event contracts on Kalshi/Polymarket
- Different product: prediction markets use binary contracts and don’t offer the same moneyline/spread/parlay structure as licensed sportsbooks
- Long-term pressure: if prediction market volume grows, sportsbook operators face pressure to lobby for a tax cut of their own — or risk a structural disadvantage
The key question the budget bill leaves unanswered: what happens when Kalshi offers a contract on a Hurricanes Stanley Cup win at the same time FanDuel offers a moneyline on the same game? For now, those are regulated under entirely different frameworks and taxed at rates more than 17 percentage points apart.
Governor Stein has not publicly indicated whether he will sign the budget.
Source: WRAL News, Will Doran, July 5, 2026. For the current state of NC’s licensed sports betting market, see our NC sports betting overview and NC Sportsbook Promos.