- North Carolina’s new budget includes an increased tax rate on sports betting operators, rising from 18% to 23%.
- It also includes a 6% tax on prediction market operators.
- Other states that have attempted to impose a tax on prediction markets have swiftly been served lawsuits by the CFTC.
RALEIGH – The new state budget for North Carolina has major implications on legal sports betting sites in the state, including an increased tax on sports betting related wagers and a brand new tax on prediction markets.
Senate Bill 257 will increase the state’s sports betting tax rate from 18% to 23% on revenue from sports betting operators and impose a 6% tax on prediction market operators. The bill passed through both the House and the Senate and is now awaiting the signature of Governor Josh Stein.
For reference, if the 5% tax increase on sports betting operators was applied to the total amount of revenue reported by North Carolina betting sites from the past 11 months, it would have yielded about another $33 million in revenue for the state.
These changes come in the wake of Senate Bill 595, which requires sports betting operators to report any users with over $2,000 in winnings over a fiscal year in order to ensure that the state isn’t losing out on tax dollars.
Prediction Market Dilemma
Like many other states, North Carolina has faced a problem with prediction markets taking away potential tax revenue from the state due to their ability to avoid the same tax laws as traditional sports betting sites.
Prediction markets, such as Kalshi and Polymarket, are regulated by the Commodity Futures Trading Commission (CFTC) and are under federal jurisdiction, allowing for them to be treated more similar to the stock market. With more and more users making the switch or using both kinds of platforms, it has led to potential tax dollars going by the wayside.
While there have been numerous legal battles attempting to force prediction markets to follow the same laws as traditional sports betting sites, some states have instead opted for a separate tax on prediction markets, including Kenucky, Illinois, and Minnesota. Each state has been met with lawsuits from the CFTC.
