North Carolina Budget Delivers 23% Sports Betting Tax Against 6% Prediction Market Rate as Tribal Objections Mount

North Carolina’s General Assembly passed a $34 billion budget on third reading that raises the online sports betting tax from 18% to 23% and imposes a 6% tax on prediction market net trading fee revenue. Both chambers approved the conference report for SB 257 on Wednesday, sending the measure to Gov. Josh Stein for signature, veto, or automatic enactment within 10 days.

The legislation creates a nearly four-to-one tax imbalance between licensed sports betting operators and prediction markets, which the bill does not classify as gambling. Prediction platforms would face no state requirements for know-your-customer checks or responsible gaming. According to InGame reporting, North Carolina stands alone this year in raising sports betting taxes, even as the measure also alters gambling loss deductions on state returns.

The Tax Disparity at the Core

Licensed operators will pay nearly four times the rate applied to prediction markets under the new structure. The 23% tax on sports betting revenue contrasts sharply with the 6% levy on prediction market net trading fees. Because the bill explicitly avoids labeling sports event contracts as gambling, those platforms escape the regulatory overhead that applies to state-licensed operators.

This gap is not abstract. Operators face immediate margin compression while prediction platforms operate with lighter compliance costs. The disparity arrives as the legislature delivers its first comprehensive budget since 2023, originally targeted for June 30 effectiveness but approved after that deadline.

Tribal Objections and Regulatory Concerns

Democratic Rep. Pricey Harrison opposed the budget and told colleagues the prediction market tax “seems to undermine our ability to govern and regulate sports gambling.” She added that it “seems to harm tribal casinos and legal sports betting, and it seems to give them some veracity in our state.”

Harrison further warned against “conceding the power to the Commodity Futures Trading Commission” at a time when prediction market issues sit “in highly contentious litigation.” Her statements highlight the tension between state revenue goals and tribal interests in regulated wagering. The House passed the bill 88-21, with four fewer votes than on second reading.

Operator Economics Under Pressure

Sports betting operators in North Carolina must now absorb a five-percentage-point tax increase at a moment when competitive alternatives enjoy both lower rates and fewer rules. The higher tax directly reduces after-tax returns on handle, likely forcing adjustments in pricing, promotions, or market participation.

Prediction platforms, untethered from state licensing, gain a structural cost advantage. This tilt may accelerate migration of certain event-contract activity away from the regulated sports betting stack. For client-partners balancing multi-state books, the North Carolina outcome becomes another variable in allocation decisions and compliance budgeting.

Litigation Momentum and Enforcement Limits

The bill’s approach to prediction markets raises immediate enforcement questions. It remains unclear how or whether the state can collect the 6% tax on platforms regulated by the federal Commodity Futures Trading Commission. That ambiguity adds practical friction to an already complex legal environment.

CFTC and Kalshi are currently battling in federal and state courts with more than a dozen states and tribes. Stakeholders anticipate the dispute reaching the U.S. Supreme Court. A federal court judge held a hearing this week in the CFTC’s case against Minnesota, and New Jersey recently sought an extension to file there. North Carolina’s move could intensify these conflicts by inserting state tax policy into the preemption debate.

The Competitive Calculus

This tax structure risks distorting market behavior in ways that undermine the very regulated ecosystem lawmakers intended to protect. While the revenue projection from the 23% rate may appear attractive on paper, the lighter 6% burden on prediction markets could divert activity that might otherwise flow through licensed channels subject to consumer safeguards.

Operators and tribal stakeholders now face a practical test of how such disparities influence long-term investment and participation. The governor’s decision in the coming days will determine whether this imbalance takes effect. A measured approach that aligns tax policy with regulatory oversight would better serve sustainable growth across both verticals. The outcome here may also color how other states weigh similar choices amid the ongoing federal-state litigation over event contracts.

From a strategic standpoint, the bill illustrates how revenue-driven adjustments can inadvertently strengthen the case for clearer federal boundaries. Client-partners should track implementation closely. The structural shift underway in North Carolina is likely to echo beyond its borders.

Reporting: North Carolina OSB Tax Hike, Predictions Tax Headed To Governor (www.ingame.com)