Home / Play / How North Carolina’s budget proposal incentivizes its legal sportsbooks to stop operating as legal sportsbooks in the state

How North Carolina’s budget proposal incentivizes its legal sportsbooks to stop operating as legal sportsbooks in the state

Derek Helling

Legal Writer

Publish Date: Jul 03, 2026

Fact checked by: Matt Moreno

Key Points

Measure in draft budget assesses 6% tax on net trading fee revenue for prediction market exchanges
Budget proposal also raises taxes on licensed sportsbooks’ gross revenue by 5%
Prediction markets would not face licensing requirements, responsible gambling standards, or mandates for other costs related to traditional sports wagering under bill

North Carolina’s approach to prediction market trading within its borders could represent a severe departure from how other states are responding, especially among states with regulated frameworks for online sports wagering, if a new proposal in its draft budget for the next fiscal year becomes law. While other states seek to restrict or end such trading altogether, language recently inserted into the draft encourages the same activity.

Under the proposal, North Carolina would not require exchanges to obtain licensure from the state or abide by other protocols that laws in other states impose. While the bill does include a dedicated tax for prediction market revenue, it could be much lower than what licensed sportsbooks pay in the state, which raises the question of why those sportsbook operators would continue to operate as a traditional sportsbook in North Carolina.

The sportsbook in the Circa Resort & Hotel ahead of Super Bowl LVIII on February 10, 2024 in Las Vegas, Nevada.

(Photo by Mario Hommes/DeFodi Images via Getty Images)

Amendment to North Carolina draft budget addresses prediction market trading

Proposed Article 2F in the budget workup in North Carolina addresses a “Tax on Prediction Markets.” The section includes definitions of relevant terms and states that only exchanges registered with the United States Commodity Futures Trading Commission (CFTC) are valid in the state.

The key language in the section says that a “tax is imposed on each operator of a prediction market at the rate of six percent (6%) of the operator's net trading fee revenue apportionable to the State. This tax does not impose any license, registration, or other regulatory requirements or obligations of any kind on prediction markets.”

To clarify the apportionment, the text dictates that “revenue of a prediction market operator is apportionable to the State if it involves the trading of an event contract by a resident of the State, who is domiciled and present in the State at the time of the trade, on a prediction market that results in payment of trading fees by that resident.”

Currently, there is no dedicated assessment for such activity in North Carolina, so this tax could represent new revenue in theory. However, the proposal couldn’t represent a much better deal for exchanges, especially in light of how the budget treats legal sportsbooks in North Carolina.

Budget proposes 5% hike for licensed sportsbooks

The budget, which the North Carolina legislature could finalize soon, also proposes raising the tax rate for licensed sportsbooks’ gross revenues from 18% to 23%. For traditional sports wagering, that means 23% of the amount that the books win from bettors who lose their wagers.

In that way, North Carolina falls in line with other states who have similarly escalated tax rates for legal sports wagering. Illinois has effectively done so twice within the last two years, for example.

Licensees in these states, including North Carolina, have pushed back against the tax hikes, stating that it forces them to pass the additional costs onto the bettor and thus makes their product operating within the regulated space less competitive with unlicensed websites.

Even with the proposed increase to 23%, though, North Carolina’s rate is still far lower than the national highs that online sportsbooks are paying in Arkansas and New York of 51%. However, North Carolina’s proposal for prediction markets represents a stark contrast from how other states are attempting to regulate the exchanges.

How prediction market laws in Illinois, Minnesota, and Kentucky compare

Three states have already enacted statutes affecting prediction market exchanges, and all three are a little different. Minnesota’s law is effectively a total ban on the trading.

Kentucky was the first to pass a law of this type, levying a 14.25% tax on exchanges’ revenues and banning Kentucky sports betting license holders from also offering sports event contracts to people in the state. Illinois’ law is the most undesirable for exchange operators of the three.

Illinois’ statute, which was also part of its budget for the upcoming fiscal year, requires exchanges to apply for a new category of license to offer sports event contracts, pay a 50% tax on their revenues, and abide by many of the same regulations that apply to licensed sportsbooks in the state.

North Carolina’s proposal resembles the statutes in Illinois and Kentucky by imposing a dedicated tax on prediction market revenue, but differs in that the assessment only applies to net revenue rather than gross.

North Carolina’s rate is less than half of Kentucky’s and nearly a ninth of the assessment in Illinois, too. Most poignantly, it represents a tremendous savings compared to the cost of operating a legal sportsbook in North Carolina.

Costs for operating a legal sportsbook in North Carolina

The potential 23% tax rate in North Carolina for sports wagering revenue might be the largest expense for operators in the state, but it isn’t the only cost of doing business there in that way. Acquiring the appropriate license to operate a book costs $1 million, and books incur that cost again every five years to renew the license.

North Carolina also requires books to use official league data to settle most bets, which represents another mandatory cost. Other administrative costs like ensuring compliance with responsible gambling standards are inevitable along the way as part of working within that regulated system.

Currently, exchanges offering prediction markets to people in North Carolina have similar administrative costs pertaining to regulation. It’s otherwise difficult to not emphasize the comparatively more favorable structure for prediction market trading that the proposed North Carolina budget represents.

How prediction market exchange operation could represent a savings in North Carolina

The budget proposal has a 6% assessment for prediction market revenue, and that only on apportioned net revenue. That means that trades made by North Carolina residents while they are out of the state wouldn’t count toward the assessment, nor would trades made by people who legally reside elsewhere but are in North Carolina when they incur the fees.

Additionally, the distinction between gross and net revenue is important. Depending on volume, the savings that presents could be significant.

The budget measure does not require exchanges to use official league data sources for sports event contract settlement or maintain responsible gambling standards. The exchanges may do so voluntarily, but there is no legal requirement in the proposal.

As the text of the bill states, there will be no licensing requirement for exchanges in North Carolina, either. That alone means a potential savings of millions of dollars over time in comparison to operating a licensed sportsbook in North Carolina.

While the budget measure still faces final votes in both legislative chambers as well as a potential veto from Gov. Josh Stein, it undoubtedly creates a landscape that makes operating as a prediction market less expensive than operating as a legal sportsbook. Several sportsbooks in North Carolina already have the infrastructure in place to quickly make the switch.

DraftKings, Fanatics, and FanDuel already have prediction market products

Currently, there are three companies with sportsbook licenses in North Carolina that also operate exchanges. Those exchange products are DraftKings Predictions, FanDuel Predicts, and Fanatics Markets.

Fanatics Markets is not currently available in North Carolina, while DraftKings Predictions and FanDuel Predicts operate there on a limited basis. DraftKings Predictions and FanDuel Predicts do not provide sports event contracts in North Carolina to avoid competing with their online sportsbooks.

However, those are company decisions, not policies that have been compelled upon DraftKings, Fanatics, or FanDuel by regulators or statutes. There is really nothing to stop those three companies from forfeiting their sportsbook licenses, shutting their sportsbooks down in North Carolina, and offering their full prediction market products in the state instead.

In fact, this budget proposal incentivizes them to do so. Should it become final in its current form, it may only be a matter of time before companies like DraftKings, Fanatics, and FanDuel do the math.

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