North Carolina Just Made History With Its New Prediction Markets Law
North Carolina Governor Josh Stein, on Tuesday, signed the state’s $34 billion budget into law, telling reporters, “After careful deliberation, this morning I will sign the state budget into law.” Buried inside the roughly 634-page document is a provision that does something no other state has done: it formally recognizes that prediction markets companies like Kalshi and Polymarket can legally operate in North Carolina under federal oversight, and only federal oversight.
Starting January 1, 2027, those platforms will pay a 6% tax on their net trading fee revenue generated in the state. A fiscal memo estimates that it will bring in about $2 million next year. What the law does not do is just as notable: it sets no license requirements, no registration process, and no state-level oversight of any kind for prediction market operators.
Compare that to the online sportsbook industry, whose tax rate under the same budget just jumped from 18% to 23%, with operators also covering license fees the newer prediction platforms will not have to pay.
What Are Prediction Markets?
Prediction markets let users trade contracts tied to the outcome of real-world events, everything from World Cup results and NBA free agency moves to tariff rates and elections.
Recently popular contracts on Polymarket and Kalshi have covered soccer World Cup matches, U.S.-China tariffs, a possible nuclear deal with Iran, and where LeBron James might sign next.
Because the CFTC regulates these companies as futures markets, similar to contracts on oil or cattle prices, they have operated in a kind of legal gray zone at the state level. No state had explicitly said “yes, you can operate here” until North Carolina did.
Why This Is Such a Big Deal
Kentucky and Illinois already tax prediction markets, but North Carolina went a step further by codifying, in the text of the law itself, that CFTC oversight is “exclusive.” That is the exact language state attorneys general, including North Carolina’s own Jeff Jackson, have been fighting in court filings for months, arguing prediction markets should answer to state gambling regulators too.
Senate leader Phil Berger acknowledged the platforms’ momentum, telling reporters it was “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.” House Speaker Destin Hall put it more bluntly: platforms like these are already active across the state, so lawmakers figured it was time to deal with it.
Not Everyone Is Cheering
Mick Mulvaney, once President Trump’s chief of staff and now head of the advocacy group Gambling Is Not Investing, did not hold back: “Prediction markets are unlicensed sports gambling apps, full stop.” State Senator Julie Mayfield had a more sardonic take before voting for the budget anyway: “I don’t know who their lobbyists are, but congratulations. That’s just rich.” Critics also note that North Carolina universities depend on sportsbook tax revenue for their athletic programs, money that could shrink if activity shifts toward the far more lightly taxed prediction platforms.
What Happens Next
The tax kicks in January 1, 2027. Kalshi and Polymarket have not said whether they will challenge the new framework or simply operate under it, and legal battles over CFTC authority are already playing out in several other states.
Whether North Carolina’s approach becomes a model for other legislatures, or a cautionary tale, is still an open question. Given how this industry works, maybe the safest prediction is that everyone will be watching the odds on that one too.
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