preferred on
Points of Focus
- North Carolina taxes prediction markets at 6% of net trading fees.
- Sportsbooks now pay 23% of gross wagering revenue in comparison.
- Kalshi argues different revenue models make headline rates misleading alone.
North Carolina has created one of the clearest tax divides yet between prediction markets and conventional sportsbooks, imposing a 6% tax on prediction-market net trading fee revenue while raising the state’s sports-betting tax to 23% of gross wagering revenue.
The prediction-market tax takes effect Jan. 1, 2027, under the state budget signed by Gov. Josh Stein on July 7. The same legislation also recognizes Commodity Futures Trading Commission-registered prediction markets as operating under exclusive federal jurisdiction, giving platforms such as Kalshi a clearer legal route into the state than they have in many other jurisdictions.
The difference between 6% and 23% has already drawn political criticism, particularly because sports contracts offered by prediction markets can resemble bets available through licensed sportsbooks.
But the percentages are applied to very different revenue bases.
North Carolina’s latest budget bill went into effect July 1, but the new tax on prediction markets won’t go into force until Jan. 1, 2027 — and the first payments won’t be due from operators until Jan. 31, 2028.
In addition, unlike traditional sportsbooks, prediction markets…
— InGame (@InGameHQ) August 31, 2026
Prediction markets are taxed on fees, not customer losses
North Carolina’s Fiscal Research Division says prediction-market operators will pay 6% on net trading fee revenue attributable to North Carolina.
Its model assumes prediction markets generate gross fees equal to about 1.31% of trading volume, with roughly 25% of those fees returned to customers through promotions and incentives. That produces an estimated taxable base of $21.2 million in 2026 from an assumed $2.16 billion of North Carolina trading volume.
At a 6% rate, that would generate approximately $1.3 million in annual tax revenue based on 2026 activity. The state projects collections rising as the sector expands, reaching about $7.7 million on 2030 activity under its assumptions.
Sportsbooks face a different calculation.
North Carolina increased their tax from 18% to 23%, effective July 1, 2026. The tax is applied to gross wagering revenue, broadly the amount sportsbooks retain after paying winnings, rather than a transaction fee charged for matching buyers and sellers.
That difference makes a simple 6%-versus-23% comparison imperfect, but it does not eliminate the political question over whether prediction markets receive preferential treatment.
Kalshi says sportsbooks make far more from equivalent volume
Kalshi has defended North Carolina’s structure by arguing that prediction exchanges operate on much thinner margins.
In a recent response to criticism of its lobbying and state tax treatment, Kalshi said US online sportsbooks retained an average 10.2% of wagers in 2025, compared with a blended prediction-market fee of roughly 1% of trading volume.
The company argues that applying the same tax rate to both industries would therefore tax fundamentally different amounts of revenue. It also says prediction-market winners can generate taxable capital gains, creating another source of state revenue outside the operator tax. Those are Kalshi’s claims and depend heavily on trading behavior, profitability and tax compliance assumptions.
North Carolina lawmakers were not unanimous about the reasoning.
During a PBS North Carolina discussion, critics questioned why prediction markets should receive a 6% rate while sportsbooks pay 23%, especially when both can offer markets tied to the same sporting events.
The tax provision also followed lobbying by Jim Harrell on behalf of Kalshi. Kalshi has acknowledged that its feedback influenced the final language, while arguing that shaping legislation is the normal role of industry lobbyists.
North Carolina is taking the opposite path from several states
The policy stands out because other states are trying to regulate prediction markets much more aggressively.
Nevada recently won a Ninth Circuit ruling allowing it to enforce state gambling laws against Kalshi’s sports contracts, while similar disputes are underway across roughly 20 states.
Kentucky has sought to impose a 14.25% tax on prediction-market transaction fees, while Illinois has tried to bring event contracts into its sports-wagering regime. Both approaches have contributed to legal fights over whether federal commodities law prevents states from regulating CFTC-supervised markets as gambling.
North Carolina has gone in the other direction: accepting federal preemption and building prediction markets directly into its tax code.
The result gives Kalshi and other federally registered platforms an unusually clear operating framework, but it also creates a politically sensitive comparison. A sports contract can now face a 23% operator tax when offered by a sportsbook and a 6% fee-revenue tax when structured as a prediction-market contract.
Whether those rates produce roughly comparable tax receipts, as Kalshi argues, will become easier to test once the 6% regime starts generating real revenue in 2027.
Share
Most read articles
