Key facts
- North Carolina enacted a law recognizing the CFTC's federal regulatory authority over prediction markets.
- The law imposes a 6% tax on prediction market operators' net trading fee revenue attributable to North Carolina residents.
- This tax rate is significantly lower than the 23% rate applied to sports betting operators in the state.
- The statute explicitly states the levy carries no licensing, registration, or other regulatory obligations.
- The law comes after a New York judge denied Kalshi's request to block state gambling regulators, ruling the Commodity Exchange Act does not preempt New York's gambling laws for its sports contracts.
North Carolina has passed a law that formally recognizes the Commodity Futures Trading Commission's (CFTC) federal regulatory authority over prediction markets, such as Kalshi and Polymarket. Signed by Governor Josh Stein on July 7 as part of the state's 2026 budget, Senate Bill 257 establishes that a prediction market registered and licensed by the CFTC may operate lawfully in the state, citing the Commodity Exchange Act's "exclusive federal regulatory authority" over such platforms.
The new law imposes a 6% tax on operators' net trading fee revenue attributable to North Carolina residents from January 1, 2027. Crucially, the statute specifies that this levy carries no licensing, registration, or other regulatory obligations, distinguishing it from the state's approach to sports betting. North Carolina simultaneously increased its tax on sports betting operators to 23% of gross wagering revenue, a significantly higher rate.
This move by North Carolina stands in contrast to actions in other states, where prediction markets have increasingly been treated as unlicensed sports betting. Over a dozen states have pursued such crackdowns, leading to numerous lawsuits. The CFTC has initiated legal action against at least nine states to assert its exclusive jurisdiction. Courts have issued conflicting rulings, with platforms securing injunctions in New Jersey and Tennessee but facing losses in Maryland, Nevada, and Arizona.
The North Carolina law's passage follows a significant courtroom setback for Kalshi, where a New York federal judge denied its request to block state gambling regulators. The judge ruled that the Commodity Exchange Act does not preempt New York's gambling laws as applied to Kalshi's sports contracts. With these divergent court decisions, the dispute is increasingly expected to reach the U.S. Supreme Court. The CFTC is also in the process of finalizing national rules for event contracts, with the public comment period set to close on July 27.