North Carolina has quietly done something most states have refused to do: formally take the federal government’s side in the escalating battle over CFTC regulation of prediction markets. Governor Josh Stein signed Senate Bill 257 on July 7, 2026, as part of the state’s annual budget — a move that positions North Carolina as one of the few states to recognize Washington’s authority over platforms like Kalshi and Polymarket rather than treating them as unlicensed gambling operations.
Summary
Key takeaways
- North Carolina’s Senate Bill 257, signed July 7, 2026, formally recognizes the CFTC’s exclusive federal regulatory authority over prediction markets.
- The law imposes a 6% tax on prediction market operators’ net trading fees attributable to North Carolina residents, effective January 1, 2027 — with no licensing or registration requirements attached.
- That 6% rate is far below the 23% tax North Carolina applies to sports betting operators.
- The CFTC has sued at least nine states defending its jurisdiction, while more than a dozen states treat prediction markets as unlicensed sports betting.
- The CFTC is finalizing national event contract rules, with a public comment period closing July 27, 2026.
North Carolina Enacts Law Recognizing CFTC Authority Over Prediction Markets
Senate Bill 257 is direct in its logic. A prediction market registered and licensed by the Commodity Futures Trading Commission may operate lawfully in North Carolina because, as the statute puts it, the Commodity Exchange Act establishes the agency’s “exclusive federal regulatory authority” over such platforms. The state isn’t trying to regulate prediction markets — it’s explicitly deferring to Washington on that question.
Senate Bill 257 and Governor Josh Stein’s Signing
Stein’s signature came on July 7, embedded inside the broader 2026 state budget. That’s a deliberate legislative choice: folding this into a budget bill reduces the political visibility of the decision while still placing it firmly on the books. The timing is notable. It arrived days after a New York judge handed Kalshi a significant courtroom setback, deepening an already fractured national legal picture.
What the law says on jurisdiction is clean and unambiguous. What makes it analytically interesting is what it doesn’t say — it does not attempt to define prediction markets as gambling, does not impose licensing requirements, and creates no parallel state enforcement mechanism. It simply acknowledges the CFTC’s lane and steps out of it.
Taxation and Regulatory Provisions
The financial terms are equally notable for their restraint. Starting January 1, 2027, prediction market operators will owe a 6% tax on net trading fee revenue attributable to North Carolina residents. The statute explicitly states the levy carries no licensing, registration, or other regulatory obligations of any kind — operators pay the tax and operate under federal oversight, full stop.
Compare that to how North Carolina treats traditional bookmakers. The state simultaneously raised its tax on sports betting operators from 18% to 23% of gross wagering revenue. The gap between 6% and 23% isn’t just a number — it reflects a legislative judgment that prediction markets are a categorically different product, one that shouldn’t be burdened with the same regulatory overhead as gambling.
That contrast matters for operators like Kalshi and Polymarket. A state that charges a moderate fee, imposes no licensing burden, and defers to federal oversight is precisely the kind of regulatory environment prediction market platforms have been asking for as they fight off enforcement actions elsewhere.
National Legal and Regulatory Conflict Over Prediction Markets
North Carolina’s cooperative stance is an outlier in a national picture that looks increasingly like a legal war. More than a dozen states have moved to classify prediction markets as unlicensed sports betting, placing themselves on a collision course with the CFTC’s authority under the Commodity Exchange Act.
State-Level Litigation and Regulatory Divergence
The CFTC has sued at least nine states to defend its exclusive jurisdiction, and the lawsuits keep multiplying. Kentucky passed a law taxing prediction market platforms at 14.25% of transaction fees — more than twice North Carolina’s rate — and added licensing requirements that prompted a CFTC complaint. Illinois went further, folding prediction markets into its sports-wagering regime with a tiered transaction tax and full licensing obligations. Kalshi moved swiftly to challenge Illinois in court.
The court results have been deeply inconsistent. Platforms won injunctions in New Jersey and Tennessee. They lost in Maryland, Nevada, and Arizona. With rulings pointing in opposite directions depending on which courthouse you’re standing in, the dispute has the shape of a circuit split — the kind that eventually forces the U.S. Supreme Court to intervene and settle the underlying question once and for all.
CFTC’s Enforcement Actions and Federal Rulemaking
While the litigation plays out, the CFTC is pursuing a parallel track: writing the national rules itself. The agency is finalizing regulations for event contracts, with a public comment period set to close on July 27, 2026. If those rules take effect, they could eventually paper over the state-by-state patchwork — or sharpen the legal conflict by giving states something concrete to challenge.
The broader stakes here extend beyond any single state’s tax code. The CFTC’s push to establish exclusive federal jurisdiction over prediction markets is a structural argument about where financial product regulation sits in the American legal system. If the agency wins — in court or through rulemaking — it would effectively preempt state gambling laws for a growing class of contracts. If states prevail, the result is a fragmented market where operators face different legal obligations in every jurisdiction, a regulatory environment that tends to consolidate activity in compliant states or push it offshore entirely.
North Carolina’s approach — light taxation, no licensing, federal deference — is essentially a bet on the CFTC winning that argument. Whether that bet pays off depends on what happens in federal courts and eventually, perhaps, on the steps of the Supreme Court.
FAQ
What is the significance of North Carolina’s new law on prediction markets?
It formally recognizes the CFTC’s exclusive federal regulatory authority over prediction markets and imposes a 6% tax on operators’ net trading fees attributable to North Carolina residents, without imposing any additional state licensing or registration requirements. This makes North Carolina one of the few states to defer to federal oversight rather than treating prediction markets as unlicensed gambling.
How does North Carolina’s tax rate on prediction markets compare to sports betting taxes in the state?
The tax rate on prediction markets is set at 6% of net trading fee revenue, significantly lower than the 23% tax North Carolina applies to sports betting operators. The state also recently raised that sports betting rate from 18% to 23%, making the gap even wider.
Why is there ongoing litigation related to prediction markets in the US?
More than a dozen states treat prediction markets as unlicensed sports betting, which directly conflicts with the CFTC’s claim of exclusive federal jurisdiction under the Commodity Exchange Act. That conflict has triggered multiple lawsuits — the CFTC has sued at least nine states — and court rulings have varied widely, creating a national legal split that may ultimately require the U.S. Supreme Court to resolve.
What is the CFTC doing to address regulatory conflicts around prediction markets?
The CFTC is actively suing states that assert authority over prediction markets, defending its exclusive jurisdiction. Separately, it is finalizing national rules for event contracts, with a public comment period closing on July 27, 2026. Those rules could eventually establish a uniform federal framework that supersedes the current state-by-state patchwork.
Article produced with the assistance of artificial intelligence and reviewed by the editorial team.
