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North Carolina governor finalizes budget with prediction market recognition, taxation measures

Legal Writer

Publish Date: Jul 08, 2026

Fact checked by: Matt Moreno

Key Points

North Carolina law recognizes federal government’s exclusive regulation of prediction market exchanges
Statute levies 6% tax on exchanges’ apportioned net revenues from user transactions
Budget also raises North Carolina’s tax on licensed sportsbooks’ revenues

North Carolina has finalized its first budget in three years, including new provisions applying to prediction market exchanges and sportsbooks licensed to operate in the state. Gov. Josh Stein signed the legislative package on Tuesday, setting in place a new tax for exchanges and higher taxes for sportsbook operators.

North Carolina’s new budget also bucks a national trend by explicitly stating that the state otherwise has no business in regulating prediction market trading, including sports event contracts. The wording of the statute brings into question whether sportsbooks in the state will transition to the exchange model as a result.

Stein enacts North Carolina’s largest budget

According to Jacee Caldwell of WECT, Stein added his signature to the $34 billion spending plan on Tuesday. The legislative package represents the first new budget for North Carolina since 2023, and a first in the nation regarding prediction market exchanges.

The budget includes a section that addresses exchanges explicitly, stating that North Carolina does not “impose any license, registration, or other regulatory requirements or obligations of any kind on prediction markets.” That stands in stark contrast to the law enacted in Illinois, which requires exchanges to obtain licensure in order to offer sports event contract trading to people in the state.

With this budget, North Carolina is the first to explicitly recognize the United States Commodity Futures Trading Commission (CFTC) as the regulatory body for prediction market exchanges. The bill does tax those platforms, though.

Prediction market tax now law but ripe for challenge in North Carolina

The budget contains a 6% tax on CFTC-regulated exchanges’ apportioned net revenues. In this context, apportioned net revenues refer to such revenues that arise from transactions that are initiated by North Carolina residents while they are physically within the state’s borders.

The language of the law does not seem to consider revenue from transactions of non-residents while in North Carolina or transactions incurred by North Carolina residents while they are out of state taxable. Courts may yet have something to say about that, though.

It’s also important to point out that the tax is upon operators’ net revenue rather than gross, which could represent another significant reduction in the tax dollars that North Carolina is able to collect if this statute survives court challenges.

The CFTC and exchange operators have sued Illinois and Kentucky in federal courts over their attempts to tax exchanges, so similar legal challenges may be forthcoming. Sportsbooks in the state are also facing decisions.

Sportsbooks facing higher taxation in North Carolina

With Stein’s signature, legal sportsbooks in North Carolina must pay 23% of their gross revenues to the state, representing an increase of 5%. Due to the additional licensing requirements and regulatory costs that sportsbook operators in North Carolina face as well, it’s significantly cheaper to run a prediction market exchange in North Carolina than a sportsbook.

Multiple North Carolina sportsbooks like DraftKings and FanDuel already have active exchanges but have refrained from offering sports event contracts in North Carolina to avoid competing with their sportsbook products. Fanatics has not yet taken its prediction market platform live in the state for the same reason.

That could change, as sportsbook licensees can voluntarily forfeit those licenses and take their prediction market platforms fully live with North Carolina’s blessing. However, the companies may wait to see how litigation across the country plays out before making that move.

Because of the novel legal approach, other state governments will likely be paying close attention to how things proceed in North Carolina. The “experiment” has begun with Stein’s signature.

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