North Carolina Budget Proposal Takes First Step Toward Regulating Prediction Markets
North Carolina lawmakers have included a provision in the new state budget that would formally authorize prediction market betting companies such as Polymarket and Kalshi while imposing a 6 percent tax on their net revenues, marking the first such framework in any U.S. state. The measure addresses activity already taking place among state residents and seeks to capture revenue from an emerging sector that operates without prior state-level licensing or taxation.
The proposal appears in the broader budget package that now awaits action from Gov. Josh Stein. Senate leader Phil Berger and House Speaker Destin Hall have backed the language, citing the opportunity to generate income from transactions that continue regardless of regulatory status. The 6 percent rate on net revenues would apply once companies obtain authorization to operate within the state.
Details of the Proposed Framework
The budget language creates a pathway for prediction market platforms to receive formal approval while establishing the tax obligation. Companies would report net revenues, defined as total wagers minus payouts and certain fees, and remit the 6 percent amount to the state. Observers note that the provision stops short of creating a full licensing structure comparable to the one already in place for sports betting operators.
Current sports betting in North Carolina carries an 18 percent tax on gross gaming revenue, scheduled to rise to 23 percent in July 2026. The lower rate proposed for prediction markets has drawn attention because the two categories can overlap on event contracts that resemble sports wagers. Lawmakers have not yet specified how overlapping products would be classified or taxed if both frameworks operate simultaneously.
Positions of Key Stakeholders
Supporters within the legislature argue that the provision simply recognizes existing participation and brings it under a basic tax regime. They point out that residents already access offshore or unregulated platforms, so formal authorization could shift some volume to entities that pay state taxes. Critics, including certain Democratic lawmakers and industry groups representing licensed sportsbooks, contend that the lower tax rate could divert activity away from higher-taxed channels once prediction markets gain official standing.
Industry representatives have also highlighted differences in regulatory oversight. Licensed sportsbooks operate under detailed rules covering advertising, consumer protections, and responsible gaming measures. The prediction market provision contains fewer explicit requirements in those areas, leaving some observers concerned about consistency across betting products available to the same customers.
Timing and Implementation Considerations
The budget measure does not set an immediate effective date, leaving details to be worked out after gubernatorial review. If approved, state agencies would need to develop application procedures, reporting standards, and enforcement mechanisms before companies could begin paying the new tax. The July 2026 increase in the sports betting rate adds another layer, because operators in that category will face a higher burden at the same moment prediction markets could enter the regulated space.
Analysts following state gaming policy note that similar questions have surfaced in other jurisdictions where multiple betting formats compete for the same customer base. North Carolina would become the first state to address prediction markets through explicit statutory authorization rather than enforcement actions or informal guidance.
Revenue and Market Context
State budget documents project modest initial collections from the 6 percent tax, though exact figures depend on how many platforms apply for authorization and how much volume shifts from unregulated sources. Existing sports betting revenue has grown steadily since legalization, providing a benchmark for what prediction market activity might generate under the new rate. The proposal treats prediction markets as a distinct category even though some contracts mirror traditional sports or election outcomes already addressed by licensed operators.
Data from other states shows that election-related contracts have drawn significant interest during national cycles, while event contracts tied to entertainment and weather have expanded more gradually. North Carolina officials have not released projections separating these contract types for tax purposes.
Conclusion
The budget provision now sits with Gov. Josh Stein for review, after which state agencies would begin shaping the practical rules that determine how prediction market companies enter the North Carolina market. The 6 percent tax rate, the absence of a full licensing regime, and the upcoming July 2026 sports betting tax increase together create a distinct policy environment that other states may study as they consider similar questions. According to reporting from WRAL News, the measure represents the first formal state-level attempt to bring prediction markets into a taxed and authorized structure. Further details on implementation timelines will emerge once the governor acts on the overall budget package.