North Carolina passes bill recognizing CFTC preemption over prediction markets

North Carolina has enacted legislation that explicitly recognizes federal authority over prediction markets while imposing a tax rate lower than that on sports betting platforms.

On July 7, Governor Josh Stein signed Senate Bill 257 as part of the state's 2026 budget bill. 

The legislation states that registration with the Commodity Futures Trading Commission will allow prediction markets, such as Polymarket and Kalshi, to operate lawfully in North Carolina. It explicitly stipulates that the Commodity Exchange Act establishes "exclusive federal regulatory authority" of the CFTC over prediction markets.

This approach differs from several other states that are pushing to subject prediction markets to state gambling regulations and licensing, sparking legal challenges from the CFTC and the prediction market platforms. These states focus primarily on sports-related event contracts, which they allege violate state gaming regulations.

Earlier this week, a federal judge denied Kalshi's preliminary injunction to block New York regulators from enforcing its gambling laws against the prediction market platform. While Kalshi has since appealed the decision to the Second Circuit, sports law attorney Daniel Wallach said that the ruling will likely negatively affect Kalshi's ongoing legal battle with other states.

6% tax

On top of this, North Carolina's new law taxes prediction market platforms at 6% of their net trading fee revenue that is attributable to North Carolina residents, effective Jan. 1, 2027. In contrast, the state increased its tax on sports betting operators from 18% to 23% on gross wagering revenue.

The 6% tax on net fee revenue is softer than the tax approach that other states seek to impose on prediction markets. Kentucky's legislature passed a bill requiring platforms to pay 14.25% of transaction fees, prompting the CFTC to file a complaint against the state. 

Illinois folded prediction markets into its sports wagering regulatory and tax framework, imposing a tiered transaction tax on exchange wagers — 1.75% on the first 5 million wagers in the fiscal year and 3.5% thereafter — and subjecting platforms to state licensing requirements, a move that Kalshi promptly challenged in court.