North Carolina taxes prediction markets, sets a higher tax on sports gambling

• North Carolina raises taxes on sports betting, introduces prediction market tax
• The state now recognizes that prediction markets may legally operate in the country, provided they have a license from the CFTC
• Other states have pursued a more aggressive course of action, with Kentucky taxing the sector at 14.25% and further taking legal action against platforms

North Carolina has passed changes to the way it regulates and taxes specific businesses in the state, with Gov. Josh Stein signing the new budget on Tuesday. The budget features two standout items, one relating to prediction market platforms, which will now be taxed at 6%, but not regulated further beyond that.

North Carolina strikes conciliatory tone with prediction markets

The second item concerns the sports betting tax increase that is set to 23% from previously 18%. The expanded tax will go to fund state universities, as North Carolina wants to boost its support of educational institutions.

"After careful deliberation, this morning I will sign the state budget into law," Gov. Stein shared on his social media handle on X. The move highlights the decision to strengthen the state’s tax base but does not address whether prediction markets need to be subject to broader debate.

In New Jersey, a similar conciliatory tone was struck, with legislators agreeing on a 9% tax, which is yet to be signed into law, rather than enacting broader discussions on how to best regulate the sector. Then again, this is just the budget, with challenges to prediction markets operators existing in New Jersey, New York, and well beyond.

The North Carolina state budget has passed other changes, though, that would appeal to consumers, with sports bettors now allowed to deduct losses on their tax forms.

Not all states are as accommodating as NC

More importantly, North Carolina’s budget recognizes the legal right of prediction markets to operate legally in the state, provided that they hold the relevant license from the Commodity Futures and Trading Commission, the regulatory body that oversees the sector and that has pushed back against attempts by state and gaming regulators to argue to the contrary.

Other states are not as accommodating, however, with Kentucky taxing prediction markets with a 14.25% excise tax on transaction fees, and the state’s attorney general, Russell Coleman, clashing with the CFTC and private operators over the right of such businesses to run in the first place.

In New York, Kalshi was just handed a temporary defeat after its preliminary request for an injunction to stop offering its event contracts locally was batted away by a federal judge.

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