North Carolina Recognizes CFTC Authority Over Prediction Markets
Quick Look
- North Carolina enacted a law recognizing the CFTC's authority over prediction markets like Kalshi and Polymarket, imposing a 6% tax on operators' revenue from state residents starting in 2027.
- This contrasts with other states' crackdowns and litigation.
AI-generated summary
Why It Matters
North Carolina has passed a law that acknowledges the CFTC's regulatory authority over prediction markets, a move that sets it apart from many other states that have sought to classify these platforms as unlicensed sports betting.
North Carolina has become one of the few states to formally side with federal regulators in the escalating fight over prediction markets, enacting a law that recognizes the CFTC's authority over platforms like Kalshi and Polymarket.
Governor Josh Stein signed the measure on July 7 as part of the state's 2026 budget, Senate Bill 257. A prediction market registered and licensed by the Commodity Futures Trading Commission may operate lawfully in the state, the statute says, because the Commodity Exchange Act establishes the agency's "exclusive federal regulatory authority" over such platforms.
Prediction markets and state taxes
The law leaves oversight of prediction markets to Washington and simply takes a cut. It imposes a 6% tax on operators' net trading fee revenue attributable to North Carolina residents from January 1, 2027, but the statute is explicit that the levy carries no licensing, registration or other regulatory obligations of any kind.
That is a far lighter touch than the state applies to bookmakers: North Carolina simultaneously raised its tax on sports betting operators from 18% to 23% of gross wagering revenue. It is also gentler than what other states are pursuing. Kentucky passed a bill taxing platforms 14.25% of transaction fees, prompting a CFTC complaint, while Illinois folded prediction markets into its sports-wagering regime with a tiered transaction tax and licensing rules that Kalshi swiftly moved to challenge in court.
Bucking the state crackdown
North Carolina's stance is an outlier. More than a dozen states have moved to treat prediction markets as unlicensed sports betting, triggering a wave of litigation. The CFTC has sued at least nine states to defend what it calls its exclusive jurisdiction, and Kentucky's suit against Kalshi and Polymarket is only the latest front. Courts have split badly, with the platforms winning injunctions in New Jersey and Tennessee but losing in Maryland, Nevada and Arizona.
The North Carolina law arrives days after Kalshi's biggest setback yet, with a New York federal judge this week denying Kalshi's request to block state gambling regulators, finding the Commodity Exchange Act does not preempt New York's gambling laws as applied to its sports contracts.
What to Watch
AI outlook — possibilities, not facts
Further legal challenges to state attempts to regulate prediction markets.
Likely · Within months
Open Questions
- Will other states follow North Carolina's regulatory approach?
- How will courts rule on the CFTC's exclusive jurisdiction claims?
