North Carolina budget proposes first state tax on prediction market operators
North Carolina lawmakers unveiled a $34 billion budget deal (SB 257) Tuesday that would impose a new 6% tax on prediction market fees while raising the sports betting tax to 23%. The proposal, published June 30, 2026, specifically targets sports event-contract platforms operating in the state alongside traditional sportsbooks. It also directs revenue to UNC and NC State athletics and allows gambling deductions, marking an expansion of the state's gambling tax base.
The 6% levy forces Kalshi and Polymarket to absorb a state cost their CFTC registration was supposed to preclude, adding a direct tax on fees to the legal bills they already face in Illinois and Michigan. Unlike offshore platforms, regulated operators cannot easily shift tax burden without breaking their compliance model or becoming price-uncompetitive. The fee-based structure matters: it reaches the platform's revenue directly rather than user winnings, compressing margins faster than a consumer-facing tax. Other states watching North Carolina's fiscal success with gambling taxes will treat passage as a template, especially if the revenue flows to popular state programs like university athletics. The first platform to pull out of a taxed state rather than absorb the cost loses that market permanently; the first to stay and pay sets the precedent others must match.
North Carolina joins Illinois and Michigan in a multi-state push to tax or block CFTC-registered prediction market platforms, testing whether state revenue grabs can coexist with federal preemption claims.