Daniel Moore (Bloomberg): North Carolina Targets Prediction Markets, Sports Betting Taxes:
North Carolina lawmakers unveiled a $34 billion budget deal (SB 257) Tuesday that includes a new 6% prediction markets tax and higher levies on sports betting providers—the latest move by the state to extract more revenue from its growing gambling industry.
The agreement announced by Republican leaders would make the state the third this year to tax prediction markets, joining Kentucky and Illinois. The measure still must pass the legislature and be signed by Gov. Josh Stein (D) to take effect.
The spending blueprint aligns with the state’s years-long march to cut income taxes, trimming the rate from 3.99% in 2026 to 3.49% in 2027, and anticipating a phaseout of the corporate income tax by 2030. Voters will decide in November whether to cap the state’s income taxes at 3.5%.
“This keeps our promise to reduce the tax burden for all North Carolinians, while expanding access to incredible educational opportunities, keeping our communities safe, and solidifying North Carolina’s status as the best state in the nation,” Senate President Pro Tempore Phil Berger said in a statement.
The bill was placed on the legislative calendar for Wednesday. Stein didn’t immediately respond to a request for comment.
Prediction markets like Polymarket and Kalshi allow players to trade contracts based on the outcome of such real-world events as elections, economic data, and sports. The platforms contend they are federally regulated commodity markets, but critics argue they are gambling platforms that should be regulated by the state.
At least 15 states have debated prediction markets legislation in the 2026 legislative year, according to the National Conference of State Legislatures.
In April, Kentucky enacted a 14.25% excise tax (HB 757) on prediction market operators’ transaction fees. Its attorney general, Russell Coleman (R), also brought enforcement actions against several prediction market players, drawing a lawsuit this month from the federal agency that regulates derivatives trading.
Illinois, meanwhile, passed a budget in June that pulls prediction markets into the tax scheme embedded in the state’s Sports Wagering Act. Kalshi sued Illinois over the tax last week.
The North Carolina spending plan would apply a 23% tax, instead of the current 18%, on sports gambling operators’ gross wagering revenue. The state has collected more than $287 million in taxes since legalizing online sports betting in 2024, according to state reports.
Meanwhile, tax legislation (SB 595) passed last week and awaiting Stein’s signature would empower the state’s revenue department to request a sports bettor’s personal information and full history of wagers made on gambling platforms.
The sports betting provisions seek to ensure bettors are correctly reporting their activity to the state, said Nathan Goldman, an accounting professor at North Carolina State University. New Jersey, Pennsylvania, Michigan, and other states have similar laws that allow gaming authorities to access betting records, but North Carolina “cut out that middleman” by handing that authority to the revenue department, Goldman said.
“It’s not really clear that they’re going to face audit or they’re going to have to pay additional amounts in tax because of this—but the threat that they will has gone up substantially,” he said.
