North Carolina affirms CFTC oversight, taxes prediction markets

Governor Josh Stein signed a provision of the state’s 2026 budget, Senate Bill 257, on July 7 that recognizes the Commodity Futures Trading Commission’s federal authority over prediction markets such as Kalshi and Polymarket and imposes a 6% tax on operators’ North Carolina‑attributable net trading fees.

The statute states that a prediction market registered and licensed by the CFTC may operate lawfully in North Carolina because the Commodity Exchange Act grants the agency exclusive federal regulatory authority over such platforms. The tax applies to net trading fee revenue attributable to residents of North Carolina starting Jan. 1, 2027. The law specifies that it does not impose state licensing, registration or other regulatory requirements on those platforms.

The bill also raises the state’s tax on sports betting operators from 18% to 23% of gross wagering revenue. The two levies use different tax bases: the prediction market charge is a percentage of net trading fees tied to residents, while the sports-betting rate applies to gross wagering revenue.

Several other states have taken different approaches. Kentucky adopted a law taxing platforms at 14.25% of transaction fees and has filed suit against market operators. Illinois has applied sports‑betting rules to prediction markets, including tiered transaction taxes and licensing requirements that at least one platform has challenged in court.

Legal disputes over jurisdiction have multiplied. The CFTC has initiated enforcement actions against multiple states, asserting exclusive authority over event contracts. Courts have issued mixed rulings: judges granted injunctions for platforms in New Jersey and Tennessee but rejected challenges in Maryland, Nevada and Arizona.

Days before North Carolina enacted its law, a federal judge in New York denied Kalshi’s request to block state gambling regulators, finding that the Commodity Exchange Act did not preempt New York’s gambling laws as applied to certain sports-related contracts.

Kentucky Attorney General Russell Coleman described Kalshi and Polymarket as operating illegal sportsbooks in Kentucky and said they were violating state law.

Separately, the CFTC is drafting national rules for event contracts and has opened a public comment period that closes July 27. The North Carolina statute recognizes federal oversight for CFTC‑registered prediction markets and creates a state tax on fee revenue without adding state licensing or regulatory requirements.