North Carolina’s New Tax on Bettors and the Continued Rise of Prediction Markets

North Carolina lawmakers have approved a sports betting tax increase that directly burdens bettors while prediction markets continue to capture growing trading volume around the World Cup. The state is raising its tax on sportsbooks from 18% to 23%. If signed by Gov. Josh Stein, the legislation will also require operators to report winnings of $2,000 or more to the state, with no ability for players to deduct losses.

This comes as Kalshi has seen daily trading volume exceed $1 billion since June 12, with more than $17 billion flowing through the platform since the World Cup began. Wednesday’s volume doubled what the exchange recorded for the Super Bowl. These developments highlight an inflection point where regulatory choices in one jurisdiction can accelerate shifts toward alternative platforms.

The North Carolina Tax Increase and Its Direct Impact on Bettors

The move to 23% was anticipated for operators. What caught many off guard was the new requirement tied to winnings of $2,000 or more at a single sportsbook. North Carolina does not permit deduction of losses, meaning a player could win $2,000, lose $2,000, and still face state taxes on the win.

This stacks on top of the federal rule that caps gambling loss deductions at 90%. Requiring operators to report this information to the state is described as unprecedented. The practical result may be to push North Carolina gamblers toward offshore books, local bookies, or prediction markets.

From my perspective after decades observing the evolution of gaming regulation, measures that ignore player economics rarely deliver the intended revenue. They instead create incentives to seek lower-friction alternatives.

World Cup Momentum Drives Record Prediction Market Activity

Prediction markets are proving to be the outsized beneficiaries of World Cup interest. Kalshi has recorded more than $17 billion in total volume since the tournament started. Daily figures have topped $1 billion consistently since June 12, and one day’s activity doubled the platform’s Super Bowl peak.

Parlays, referred to by Kalshi as “combos,” are a key driver. Much of the activity is coming from jurisdictions where sports betting remains unavailable. Susquehanna analyst Joe Stauff, whose firm supplies significant liquidity, noted that prediction markets are capitalizing where traditional sportsbooks cannot.

This pattern is expected to extend into the upcoming football season. The US men’s soccer team’s early success, even after a 3-2 loss to Turkiye under manager Mauricio Pochettino, helped fuel initial momentum before the squad advanced as Group D winner.

Kalshi’s Valuation Surge and the Broader Prediction Market Boom

Kalshi is reportedly preparing a funding round that could value the company at $40 billion, according to the Financial Times. That would represent a substantial step up from its most recent raise in May, which valued it at $22 billion.

One notable beneficiary is Donald Trump Jr., who received $300,000 in equity for a strategic advisory role when the company was valued at under $2 billion. Skeptics continue to watch the sector for signs of a bubble, yet trading volumes suggest sustained commercial appetite.

As someone who has spent decades in gaming and related advisory work, I see this as part of a larger structural shift. Event contracts are drawing liquidity that might otherwise sit in regulated sportsbooks, particularly in states with less favorable tax or reporting rules.

Risks and Limitations in the Current Landscape

Not every development this week was positive. Polymarket faced criticism after CFTC filings revealed self-certified player movement contracts that could include high school athletes committing to college programs. The NCAA had previously pushed back on similar offerings, leading Kalshi to withdraw its own college athlete transfer contracts last year.

Polymarket later stated it would not offer next-team markets in college sports. This episode underscores a limitation: while prediction markets offer flexibility, certain contract types risk public backlash and regulatory scrutiny.

Separately, the Lumbee Tribe in North Carolina voted down a constitutional amendment that would have enabled a casino resort on 241 acres of recently purchased land. 62% of participating voters opposed the measure, citing concerns over authority granted to the chairperson as well as moral and religious objections. Supporters highlighted the potential economic benefits that will now remain unrealized.

On a more constructive note, Fanatics Sportsbook announced a partnership with Integrity Compliance 360 and Signify Group under its Bad Actor Program. The initiative targets bettors who threaten or abuse athletes via social media, with sanctions ranging from suspension to bans. BetMGM and FanDuel have implemented similar account-closure policies in the past. Industry-wide alignment on this issue is welcome.

The Bottom Line

North Carolina’s decision to layer a 23% tax and mandatory $2,000 winnings reporting on bettors who cannot deduct losses illustrates how policy can accelerate migration to prediction markets. With Kalshi already exceeding $1 billion in daily volume during the World Cup and eyeing a $40 billion valuation, the competitive dynamics are clear. Operators and regulators should weigh whether such measures truly expand the tax base or simply redirect activity to less taxed channels. The coming football season will test these trends further. Client-partners navigating this environment may benefit from reviewing integrated strategies that account for both traditional sportsbooks and emerging event-contract platforms. For tailored guidance on these structural shifts, reach out to explore advisory support at https://sccgmanagement.com/our-services/.