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North Carolina lawmakers released a state budget Tuesday that would increase the tax on sports betting operators and introduce a charge for prediction market platforms.
Key Takeaways
- North Carolina is increasing the tax on online sportsbook revenue from 18% to 23%.
- Prediction markets will be taxed 6% but allowed to operate without a specific license.
- Bettors can deduct losses from winnings under the new plan.
Legislators agreed earlier this month to raise the tax rate on online sportsbooks from 18% to 23%. That clause has been included in the new $34.4-billion budget. It’s the first tax hike since sports betting went live in March 2024.
While the budget is now finalized, it must still be approved by the legislature, with the fiscal year ending Tuesday. Lawmakers failed to pass a two-year budget in 2025, so the state has been operating under the 2023 plan.
More revenue
The new sports betting tax rate will put the Tar Heel State ahead of New Jersey, Ohio, Maryland, and Massachusetts but still far behind Pennsylvania’s 36% rate, Illinois’ progressive tax system that goes as high as 40%, and New York’s 51% charge.
This move to 23% has been a year in the making in North Carolina and will generate more revenue for a state that’s hauled in over $300 million from the $1.6 billion in online operator profits.
North Carolina sports betting operators, like FanDuel and DraftKings, have strongly opposed the tax hike, warning higher costs could affect the state’s gaming ecosystem and force bettors to illegal sportsbooks.
“Legal sports betting is generating real revenue for collegiate athletic departments across the state,” FanDuel said to customers in an electronic letter. “A tax hike would threaten that funding and hit fans.”
Taxing prediction markets
North Carolina would also impose a 6% tax rate on prediction market operators that offer sports contract trading, like Kalshi and Polymarket, effective Jan. 1, 2027.
The budget states prediction market platforms registered and licensed by the Commodity Futures Trading Commission are allowed to operate without a specific state license, even if they offer sports contracts in North Carolina, which legalized regulated sports betting.
That has not been the case in other states, like Nevada and Massachusetts, which have taken legal action against Kalshi and other prediction market operators.
In other prediction market news, Illinois added a prediction market operator tax to its latest state budget, while New Jersey lawmakers are trying to pass a bill that would require trading exchanges to pay nearly 30% to the Garden State.
Other gambling changes
North Carolina’s new budget also introduces a clause that will allow bettors to deduct their losses from their winnings, retroactive to Jan. 1, 2025.
The budget also calls for a restructuring of the sports betting tax allotment for the state’s university system. Previously, North Carolina and NC State, the two largest public schools in the state, were excluded from revenue generated by sportsbooks. The budget now allows those two state-funded universities to receive up to $5.8 million beginning next July.
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