The current proposal for the North Carolina 2026 Appropriations Act, which includes a $34 billion budget for the fiscal year beginning July 1st, would set a historic precedent by recognizing the “exclusive” regulatory authority that the Commodity Futures Trading Commission (CFTC) enjoys over prediction markets. Unlike state-sponsored taxes on prediction exchange transaction fees that have passed in Illinois and Kentucky, the North Carolina version would deem any CFTC-regulated platform legal within its borders.
If SB 257 is passed and signed into law, a 6% tax on prediction market trading fees would be imposed on CFTC-regulated entities such as Kalshi starting January 1st, 2027. Simultaneously, state lawmakers are seeking to increase the tax rate that licensed sportsbooks must pay from 18% to 23%, according to a report published by Bloomberg Law.
Both the House and the Senate are expected to vote on the bill before the holiday weekend. SB 257 is expected to pass as is and will require the anticipated signature of North Carolina Governor Josh Stein before it becomes law.
A thread uploaded to X on Wednesday by US gaming analyst and Next Event Horizon Substack creator Dustin Gouker provides images of SB 257 as it’s currently written and points to the ramifications of the state legislature’s proposed tax structure for prediction market event contracts that are regulated by the CFTC.
In his newsletter entry on the topic, Gouker explains that “the new language, which surfaced in Tuesday’s proposed conference budget, would appear to mark the first time a state has sought to explicitly bless CFTC-registered prediction markets as lawful under federal authority while declining to impose state licensing, registration or other regulatory requirements.”
Gouker adds that “this type of affirming legislation with a relatively low tax rate is likely the type of model legislation prediction markets would like to see other states copy. It establishes state legality alongside a small but not entirely insignificant tax.”
The thread includes analysis from self-described “policy wonk” Fairplaygov, who doubts licensed sportsbooks in North Carolina will rush to transform their core sportsbook operations into prediction markets that can be federally regulated. Still, the language that allows regulated prediction markets to deduct promotional dollars from taxable income (while denying licensed sportsbooks in the state the ability to do the same) is noticeable.
If SB 257 is approved by lawmakers and signed by Governor Stein, it could represent a landmark shift in the narratives that prediction market advocates use to promote platforms such as Kalshi.
It will certainly be a “first-of-its-kind” state declaration concerning prediction exchanges, which have so far been treated to an onslaught of legal complaints filed by state and tribal gaming authorities who are attempting to impose local gambling laws on the trading of event contracts related to sports outcomes.
Regardless of how North Carolina views CFTC-regulated prediction markets going forward, challenges brought forth by other states and tribes are not going away. The lawsuits launched by the CFTC against nine of those states aren’t disappearing, either. A number of legal experts have opined that the court battles over how prediction market products should be defined and regulated will wind up in the US Supreme Court next year.
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