MV Capital - North Carolina Sets 6% Tax on CFTC-Regulated Prediction Markets

North Carolina has passed legislation recognizing federal CFTC authority over prediction markets, allowing platforms to operate under national rules while applying a 6% tax on net revenue from state residents starting in 2027. This stands in contrast to higher taxes on sports betting and ongoing disputes in other states

State Law Defers to Federal Oversight

North Carolina became the first state to explicitly codify the Commodity Futures Trading Commission's exclusive federal regulatory authority over prediction markets in its statutes. Through Senate Bill 257, signed by Governor Josh Stein on July 7, 2026, as part of the state budget, CFTC-registered platforms can conduct business lawfully without needing separate state licenses or facing additional gaming regulations.

The measure affirms that registration with the CFTC satisfies all state requirements for such operations. This approach provides a clear path for companies to serve North Carolina residents under federal standards rather than navigating conflicting state gambling rules.

Key Provisions of the LegislationRecognition of CFTC exclusive jurisdiction under the Commodity Exchange Act
No state licensing or registration required for compliant platforms
6% tax on net trading fee revenue from North Carolina residents
Effective date of January 1, 2027

Tax Treatment and Comparison to Sports Betting

Prediction market operators will pay 6% on net trading fees tied to state residents. In the same budget, lawmakers raised the tax rate on sports betting operators from 18% to 23% on gross wagering revenue, effective immediately. This creates a notable difference in how the two sectors are treated for tax purposes.

Unlike sportsbooks, prediction market platforms avoid the $1 million licensing fee required for sports betting operations. The structure allows the state to collect revenue from an active market segment while deferring broader regulatory questions to federal authorities.

Category	Tax Rate	Basis	Effective Date
Prediction Markets	6%	Net trading fee revenue	Jan 1, 2027
Sports Betting	23%	Gross wagering revenue	Immediate

Context Within National Regulatory Debates

Several states have taken different approaches, seeking to apply their own gambling regulations and taxes to prediction markets. Kentucky enacted a 14.25% excise tax with enforcement measures, leading to a CFTC lawsuit. Illinois incorporated prediction markets into its sports wagering framework with additional licensing and tiered taxes, prompting legal action from operators.

Courts have issued mixed rulings across jurisdictions. Platforms secured preliminary injunctions in some states like New Jersey and Tennessee, while facing setbacks in others including New York. The CFTC has pursued legal action against multiple states to defend its position on event contracts.

“A lot of it’s going on in this state anyway.”

House Speaker Destin Hall

Critics, including Mick Mulvaney of Gambling Is Not Investing, have questioned the lower tax rate and lack of state-level gambling oversight, arguing it creates uneven conditions. Supporters point to the practical reality of existing activity and the benefit of aligning with federal rules.

Implications for the Industry

The North Carolina law offers a model that combines revenue generation with regulatory deference. It stands apart from efforts in other states that impose stricter controls and higher effective burdens. As legal challenges continue and the CFTC advances its own rulemaking for event contracts, this development adds to the varied state responses across the country.

Platforms such as Kalshi and Polymarket now have clearer operating conditions in North Carolina, subject to federal compliance and the specified tax obligations. The measure forms part of broader discussions on how states address these markets amid ongoing federal-state tensions.