North Carolina Recognizes Federal Authority Over Prediction Markets

North Carolina has passed legislation confirming that federal regulators hold authority over prediction markets, while setting a tax rate well below what sports betting platforms face. Governor Josh Stein signed Senate Bill 257 into law on July 7 as part of the state’s 2026 budget.

CFTC Registration Grants Legal Standing

Under the new law, prediction market platforms such as Polymarket and Kalshi can operate legally in North Carolina simply by registering with the Commodity Futures Trading Commission. The legislation specifically states that the Commodity Exchange Act gives the CFTC exclusive federal authority over these markets, setting North Carolina apart from states attempting to regulate prediction markets under gambling laws.

Other States Take a Different Approach

Several states have pushed to apply state gambling regulations and licensing requirements to prediction markets, leading to legal disputes with both the CFTC and platform operators. Earlier this week, a federal judge denied Kalshi’s request to block New York from enforcing its gambling laws against the platform. Kalshi has appealed the ruling, though legal experts suggest the decision could weaken its position in similar battles elsewhere.

Tax Structure Comparison

North Carolina’s law will tax prediction market platforms at 6% of net trading fee revenue tied to state residents, starting January 1, 2027. By comparison, the state raised its sports betting tax from 18% to 23% of gross wagering revenue. This is notably lower than approaches taken elsewhere, such as Kentucky’s 14.25% transaction fee tax, which prompted a CFTC lawsuit, and Illinois’ tiered tax system, which Kalshi has also challenged in court.