North Carolina Governor Signs New Sports Betting, Prediction Market Taxes Into Law

North Carolina sports betting operators will face higher tax obligations after Governor Josh Stein signed the state’s $34 billion budget into law. The legislation increases the sports betting tax rate from 18% to 23%, marking the first hike since wagering launched in March 2024. Notably, this raises the Tar Heel State’s rate above those of larger markets like Massachusetts, Ohio, and New Jersey. Bettors have already helped the state generate over $300 million in tax revenue at the previous 18% rate. Moreover, the new budget introduces a 6% tax on prediction market operators, who won’t require an operating license.

Governor Stein Signs $34 Billion State Budget Into Law

Governor Josh Stein signed the state’s first comprehensive spending plan in more than 1,000 days on Tuesday, ending a legislative stalemate that stretched through extensive negotiations. Republican legislative leaders finalized the 634-page document after roughly a year of discussions over contentious items including income tax rates and funding allocations.

The spending plan secured broad bipartisan support, passing 88-21 in the House of Representatives and 35-10 in the Senate[7]. These margins provided enough votes to override a gubernatorial veto, had Stein chosen to issue one. House Speaker Destin Hall called the plan “the best budget in decades,” noting it delivers historic raises for teachers and law enforcement alongside tax relief.

The budget allocates a 3% raise for all state employees and reduces the personal income tax rate from 3.99% to 3.49% next year. Teachers received the largest starting pay raise in nearly 50 years and the largest overall increase in 15 years. Additionally, the plan fully funds Medicaid and appropriates $700 million towards Hurricane Helene relief in western North Carolina.

Stein acknowledged the legislature accepted many of his recommendations, stating democracy “has always run on compromise for the common good”. The budget raises taxes on North Carolina sports betting companies while allowing UNC and N.C. State athletics to receive revenue for the first time.

New Regulatory Framework for Prediction Markets Emerges

The budget establishes North Carolina as the first state to formally recognize federal authority over prediction markets, codifying the Commodity Futures Trading Commission’s exclusive regulatory jurisdiction into law. This provision imposes a 6% tax on net trading revenue for federally regulated operators like Polymarket and Kalshi, who will face no state licensing requirements.

The framework creates a stark regulatory contrast. While North Carolina sports betting operators operate under heavily regulated state laws, prediction market companies registered with the CFTC face zero state regulations under this proposal. Nevertheless, supporters note these platforms remain subject to federal oversight under the Commodity Exchange Act.

Industry critics have challenged this approach. One observer described prediction markets as “unlicensed sports gambling apps” that receive a “sweetheart deal” while “trampling on the state’s gambling regulations”. The legislation opens pathways for users to wager on real-world events including elections, economic data, and sports outcomes.

North Carolina joins Kentucky and Illinois as the third state to tax prediction markets this year. At least 15 states debated similar legislation during the 2026 legislative session. House Speaker Destin Hall stated lawmakers believed the time had arrived to address these platforms due to their growing popularity.

Sports betting revenue will continue supporting state universities, with UNC and NC State each receiving up to $5.80 million annually.

Operators Challenge Tax Hike Amid State Budget Deficit

Lawmakers sought additional revenue streams to fund substantial state employee raises, subsequently turning attention to sports betting operators. The Sports Betting Alliance launched a marketing campaign opposing any tax increases, warning legislators through text messages that “some lawmakers in Raleigh are pushing for a massive tax hike on legal sports wagering that punishes fans who are just playing by the rules”.

The Senate proposed a 36% tax rate last year, which would have ranked among the nation’s highest. Negotiations centered on rates between 20% and 30% before settling at 23%. Senator Jim Burgin initially advocated for a 50% rate, though states like New York, New Hampshire, and Rhode Island already impose 51% rates.

The eight licensed operators—including FanDuel, DraftKings, BetMGM, ESPN BET, Fanatics, and bet365—have generated over $1.60 billion in revenue since launch. Had a 30% rate applied from the start, North Carolina would have collected almost $200 million in additional revenue. The 23% rate would have generated roughly $37 million more during the current fiscal year.

Operators contend higher taxes force them to pass costs directly to customers through worse odds and reduced promotional offers. The Sports Betting Alliance argues increased rates “punish NC sports fans who play by the rules and push more people toward illegal offshore sites with no consumer protections”.