North Carolina has adopted a light-touch approach to prediction markets in its new state budget, imposing a 6% tax on platforms such as Kalshi and Polymarket while explicitly declining to regulate them. The move effectively acknowledges federal authority over event-contract trading even as several other states pursue litigation to assert jurisdiction under gambling laws. By contrast, sportsbooks operating in North Carolina are taxed at 23%.
North Carolina Opts to Tax, Not Regulate
The budget establishes a 6% tax on revenue derived from prediction markets—venues where users trade contracts tied to outcomes of future events, including elections, economic indicators, or sports-related propositions. At the same time, the state stops short of creating a licensing or regulatory regime for these platforms, signaling deference to federal oversight where applicable.
The policy stands in contrast to actions in other states, where attorneys general and regulators have sought court orders or enforcement actions to classify such markets as illegal gambling or to bring them under state wagering frameworks.
6% for Prediction Markets, 23% for Sportsbooks
Under the new framework, prediction market activity is taxed at 6%, a substantially lower rate than the 23% imposed on traditional sportsbooks. The disparity could widen the cost gap between the two categories of wagering, potentially influencing where market participants place risk and liquidity.
Kalshi is a federally regulated exchange that lists event contracts under oversight of the U.S. Commodity Futures Trading Commission (CFTC). Polymarket, a crypto-native platform that uses stablecoins for settlement, draws substantial global interest but restricts access by U.S. persons in many contexts following prior regulatory actions. North Carolina’s tax approach encompasses platforms of both types while refraining from state-level licensing.
Federal Preemption and the CFTC’s Role
By taxing prediction markets without establishing a state regulatory program, North Carolina is effectively signaling that, where federal law applies, the Commodity Exchange Act and CFTC jurisdiction take precedence over conflicting state gambling rules. That position contrasts with ongoing state-level challenges that argue event markets should fall squarely within the ambit of state gambling law.
The preemption question has become central as event contracts gain traction and platforms test boundaries around political, economic, and sports-related markets. North Carolina’s policy offers a template for coexistence: recognizing federal supervision, capturing tax revenue, and avoiding duplicative or conflicting state mandates.
Implications for Crypto-Native Markets
The state’s stance could reduce legal uncertainty for crypto-aligned prediction markets, which often operate across jurisdictions and rely on on-chain settlement. A lower tax rate relative to sportsbooks may also encourage greater participation in compliant markets, though platform access for U.S. users will continue to depend on federal approvals and each platform’s geofencing and compliance controls.
As more states evaluate how to handle event-contract trading, North Carolina’s approach distinguishes tax treatment from regulatory oversight—prioritizing revenue collection while deferring to federal authority on market structure and permissible contracts.