North Carolina Budget Bill Proposes First Explicit Tax Framework for Prediction Markets
North Carolina lawmakers embedded a targeted provision on page 626 of their 634-page budget bill that would authorize and tax prediction market platforms including Polymarket and Kalshi for the first time in any U.S. state. teh measure sets a 6 percent tax on net revenues from these operations while skipping licensing fees and additional regulatory layers that apply to other forms of wagering. Observers note the contrast with sports betting rates that range from 18 to 23 percent in the same state, and the proposal now sits with Gov. Josh Stein for final action.
The language appears in the broader state spending package and would take effect in July 2026 if signed. Data from similar markets elsewhere shows prediction contracts often center on election outcomes, economic indicators, and weather events rather than athletic contests, which places them outside existing sports betting statutes. Researchers tracking regulatory filings have pointed out that this marks the initial instance where a legislature has written specific statutory authorization and taxation rules for such platforms.
Details of the Proposed Tax Structure
The provision defines net revenue as total amounts collected from users minus winnings paid out and certain operational costs. Companies would remit the 6 percent figure directly to the state revenue department each quarter. No upfront licensing fee appears in the text, and the bill does not create a new oversight agency or require background checks, bonding, or advertising restrictions beyond those already in general commercial law. Analysts who reviewed the page noted that the absence of these elements keeps compliance costs lower than those faced by sportsbooks operating under separate chapters of the state code.
State officials have not released an official revenue estimate tied to this line item. Figures compiled by industry groups tracking prediction market volumes suggest annual U.S. handle on election and event contracts reached several billion dollars in recent cycles, though North Carolina-specific projections remain unavailable. The lower tax rate relative to sports betting could shift some operator focus toward the state once the rules activate in 2026.
Revenue Allocation and University Funding Concerns
Existing sports betting statutes direct portions of tax collections to the state general fund as well as public university athletic departments and problem-gambling programs. The new prediction market language does not reference those same distribution formulas. University budget officers have flagged the possibility that any migration of wagering activity from taxed sportsbooks to lower-taxed prediction platforms could reduce future allocations without a corresponding offset in the current bill text.
Critics inside the legislature have cited internal estimates showing that sports betting taxes contributed more than $40 million to higher education accounts in the most recent fiscal year. If prediction market volume grows under the 6 percent rate, the gap between projected and actual collections for those earmarked programs could widen. The budget document itself contains no mechanism to recapture lost revenue for those recipients.
Regulatory Loophole Questions
Because the measure does not impose licensing or conduct rules, some legal experts have questioned whether operators could structure products to fall under the prediction market definition while offering contracts that resemble traditional sports wagers. The bill text limits the scope to events that are not athletic competitions, yet enforcement would rely on existing attorney general authority rather than a dedicated gaming commission. Observers have noted that states with more comprehensive regulatory frameworks, such as those requiring real-time reporting and geofencing verification, maintain clearer boundaries between product categories.
The proposal also omits requirements for responsible gaming tools or age verification standards specific to prediction platforms. Current federal and state laws still bar individuals under 18 from any form of wagering, and operators would remain subject to those prohibitions. However, the absence of mandated self-exclusion lists or deposit limits for prediction markets stands in contrast to sports betting rules that took effect after the 2018 Supreme Court decision.
Next Steps and Timeline
Gov. Josh Stein has until the constitutional deadline to sign, veto, or allow the budget to become law without signature. Legislative leaders have indicated they expect the governor to act before the end of the current session. If approved, the prediction market tax provision would become effective July 1, 2026, aligning with the start of the state's next fiscal year. Companies planning market entry have begun reviewing the language with tax counsel, though no formal applications or registrations have been filed pending final enactment.
State revenue analysts continue to monitor how similar provisions in other jurisdictions have performed. One study released by a Midwest policy center last year examined early data from states that authorized event contracts under general gaming statutes and found modest collections relative to volume. North Carolina's explicit statutory approach and fixed percentage rate would provide a clearer test case once implemented.
Conclusion
The single paragraph on page 626 of the budget bill introduces a distinct tax and authorization path for prediction markets that differs from the state's existing sports betting regime. The 6 percent rate, lack of licensing fees, and absence of new regulatory structures represent the first legislative attempt to address this category directly. Revenue impacts on university programs and questions about enforcement boundaries remain open items as the document moves to the governor's desk for action ahead of the July 2026 implementation date.