North Carolina Becomes First State to Explicitly Authorize CFTC Prediction Markets — Without a License

North Carolina just rewrote the playbook for how states deal with prediction markets.

Every other state in the country has reacted to platforms like Kalshi and Polymarket with one of three moves: sue them, ban them, or ignore them. On July 2, 2026, North Carolina chose a fourth option. The General Assembly passed a state budget that explicitly says CFTC-registered prediction market platforms may operate in the state — no state license, no know-your-customer requirements, no responsible gaming rules — while paying a 6% tax on their North Carolina trading fee revenue. If Governor Josh Stein signs it, North Carolina becomes the only state in the country to have affirmatively opened its doors to prediction markets on their own terms.

"They're legal in the eyes of federal law, which doesn't regulate the companies as gambling but rather as a futures market, such as those for oil or cattle prices," WRAL reported. "But no states explicitly authorize the companies. North Carolina would become the first to do so, if the budget becomes law."

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What SB 257 Actually Says

The prediction market provision is buried near the bottom of a 600-page spending bill. Lawmakers created a new "Article 2F" to the state tax code, titled simply "Tax on Prediction Markets."

The key language is direct: a prediction market platform registered and licensed by the Commodity Futures Trading Commission may operate in North Carolina. The new tax article does not require a license, registration, permit, or other state authorization to offer event contracts. CFTC jurisdiction is explicitly recognized as sufficient.

The 6% tax applies to "net trading fee revenue apportionable to the state." The bill defines this carefully:

• Gross trading fees collected by the operator from North Carolina-connected trades
• Minus compensation paid to brokers or market makers
• Minus promotional credits or rebates
• Minus clearing or platform fees paid to a derivatives clearing organization
• Minus withdrawal fees

The "apportionable" piece matters: the tax applies only to trades where the trader is both domiciled in North Carolina and physically present in the state at the time of the trade. The Assembly NC reported that the tax takes effect starting in 2027.

Governor Stein has 10 days to sign, veto, or allow the budget to become law automatically. Given that the House passed it 88-21 and the Senate by 35-10, with bipartisan margins that make a veto override straightforward, the prediction market provisions are expected to survive.

The Tax Gap That's Getting Attention

The provision that raised the most eyebrows isn't the prediction market tax itself — it's what sits right above it in the budget.

North Carolina is simultaneously raising its online sports betting tax from 18% to 23%. State-licensed operators like DraftKings, FanDuel, and Fanatics Betting & Gaming will pay nearly four times more in tax than prediction market platforms will pay under the new structure. Licensed sportsbooks also paid $1 million each for operating licenses. Prediction markets pay nothing for entry.

Democratic Rep. Pricey Harrison, who voted against the budget, put the tension plainly: "It seems to harm tribal casinos and legal sports betting, and it seems to give them some veracity in our state. We're conceding the power to the Commodity Futures Trading Commission" while prediction markets are "in highly contentious litigation."

Mick Mulvaney, former White House chief of staff and now director of the advocacy group Gambling Is Not Investing, called it a "sweetheart deal."

"There's no reason a state should favor these rogue operators over the licensed sportsbooks who fully comply with regulations and tax structures," Mulvaney told WRAL.

Senate leader Phil Berger offered a more pragmatic view: "It's just recognition that it's out there. Whether it's something that eventually is going to take over from the sports betting, I don't know."

How North Carolina Differs from Illinois and Kentucky

North Carolina is not the first state to tax prediction market operators — Illinois passed a prediction market tax in June 2026, and Kentucky enacted a transaction-based tax earlier this year. But it is approaching the problem very differently.

Illinois model: Platforms must obtain an Illinois sports wagering license to offer sports event contracts. State regulatory requirements apply. The tax is structured as a transaction tax per wager. Kalshi has sued Illinois in federal court to block enforcement, arguing the licensing requirement conflicts with CFTC's exclusive jurisdiction.

Kentucky model: A transaction tax on each sports-related exchange wager, with a tiered rate. A coalition of platforms — including Kalshi and Polymarket — sued Kentucky to block it. The CFTC filed its own lawsuit against Kentucky as well.

North Carolina model: Platforms keep their CFTC registration as the only required authorization. No state license, no consumer protection mandates, no know-your-customer requirements. The state simply taxes the revenue and walks away. As one industry observer put it, North Carolina is treating legality and taxation as separate issues — it's the clearest attempt yet to distinguish taxation from regulation.

That distinction matters enormously in the ongoing preemption battles. If Illinois and Kentucky are arguing the state can impose its regulatory framework on CFTC-licensed exchanges, North Carolina is testing a different theory: whether a state can collect revenue from those exchanges without asserting regulatory authority over them.

The Enforcement Question Nobody Can Answer

North Carolina's approach creates a practical problem that lawmakers acknowledged but didn't resolve: it's not clear how or whether the state can actually collect a tax from platforms that operate entirely under federal oversight.

Kalshi and Polymarket, regulated by the CFTC as designated contract markets and futures commission merchants, have argued in litigation across 14+ states that the Commodity Exchange Act preempts conflicting state laws. If the platforms prevail in federal court — as they did in the Third Circuit and in Tennessee — that federal preemption argument could be extended to argue that even a purely-revenue-focused state tax conflicts with the CEA's exclusive federal scheme.

Forbes reported that monthly trading volume across prediction markets has reached $24 billion industry-wide, fueling the surge in state attention. As of July 2026, Kalshi and Polymarket face active enforcement actions and litigation in more than a dozen states, with the CFTC defending the platforms' federal jurisdiction in several cases. Stakeholders widely expect the issue to reach the U.S. Supreme Court.

North Carolina's tax model — tax without regulation — may be tested in court as a distinct legal theory from the licensing-based approaches in Illinois and Kentucky.

What This Means for Kalshi and Polymarket Users in North Carolina

For traders in North Carolina, the practical near-term impact is limited. Both Kalshi and Polymarket already operate in North Carolina under their CFTC authorizations. The budget provision doesn't change their access to the platforms — it changes whether the state can claim a cut of operator revenue starting in 2027.

Users will not face new state registration requirements. The platforms will not need state licenses to serve North Carolina customers. Whether the platforms ultimately pay the 6% tax depends on the outcome of ongoing federal preemption litigation — and whether North Carolina itself has the appetite to enforce it against CFTC-regulated exchanges.

What the budget does signal clearly: North Carolina's legislature has chosen to treat prediction markets as a legitimate revenue source rather than a legal threat. That's a meaningful shift in the political climate, and one that other states are watching.

FAQ

Are prediction markets legal in North Carolina?
They already operate in North Carolina under CFTC authority. If SB 257 becomes law, North Carolina will be the first state to explicitly acknowledge that CFTC-registered prediction market platforms may operate within its borders — without requiring a state license.

How much is the North Carolina prediction market tax?
The budget imposes a 6% tax on "net trading fee revenue apportionable to the state" — meaning fees tied to trades made by North Carolina residents physically present in the state at the time of the trade. The tax is scheduled to take effect in 2027.

How does this compare to sports betting taxes in North Carolina?
Sports betting operators pay 23% (raised from 18% under this same budget) plus $1 million for operating licenses. Prediction market platforms would pay 6% with no license fee — roughly one-fourth the sports betting rate with no upfront regulatory cost.

Will Kalshi and Polymarket pay the tax?
Uncertain. Both platforms have argued in federal courts that the Commodity Exchange Act preempts conflicting state requirements. Whether a purely revenue-based tax — not a licensing regime — is preempted under the CEA is an open legal question that may ultimately be resolved by the Supreme Court.

What happens if Governor Stein vetoes the budget?
A veto is unlikely given the bipartisan margins (House 88-21, Senate 35-10). If Stein signs or allows the budget to take effect without action, the prediction market tax provisions become law as written.

What Comes Next

North Carolina's approach represents a third path in the state-vs.-prediction-market standoff: neither ban nor regulate, but tax and step back. Whether it holds up legally — and whether it produces actual revenue — will be closely watched.

For now, users on PredictionMarkets.US can track live odds from Kalshi and Polymarket across sports, politics, and economic events, regardless of which state they're in.

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Sources & Verification

• 6% tax on net trading fee revenue; CFTC platforms may operate without state license: WRAL, July 5, 2026 — verified July 5, 2026
• House vote 88-21; Senate vote 35-10; sent to Governor Stein: WRAL, July 5, 2026 — verified July 5, 2026
• Tax takes effect 2027: The Assembly NC, June 30, 2026 — verified July 5, 2026
• "No states explicitly authorize the companies": WRAL, July 5, 2026 — verified July 5, 2026
• Sports betting tax raised from 18% to 23%; prediction market provision in Article 2F: WRAL, July 5, 2026 — verified July 5, 2026
• Monthly trading volume $24 billion; Kentucky/North Carolina taxes: Forbes, July 1, 2026 — verified July 5, 2026
• Rep. Pricey Harrison quote; Senate leader Phil Berger quote; Mick Mulvaney quote: WRAL, July 5, 2026 — verified July 5, 2026
• Illinois licensing model; Kalshi Illinois lawsuit: NC General Assembly SB 257 text; Forbes, July 1, 2026 — verified July 5, 2026
• Net trading fee revenue definition (exclusions): NC General Assembly SB 257 text via WRAL reporting — verified July 5, 2026