North Carolina Governor Josh Stein signed the state's budget on Tuesday, which includes a notable increase in the online sports betting tax and provisions for taxing prediction market platforms, despite not regulating them.
Under Senate Bill 257, the online sports betting tax rate will rise from 18% to 23% of gross wagering revenue. Additionally, changes were made regarding how this tax revenue is distributed. The proposal to increase the tax was first considered in April 2025, with an initial suggestion to double the rate to 36%, which would have ranked North Carolina among the top five states with the highest sports betting tax rates in the U.S. Although that proposal did not gain traction, a more moderate increase to a range of 20% to 25% received support from state lawmakers, ultimately settling on the new rate of 23%.
The budget also introduces a 6% tax on prediction markets’ net trading fee revenue, generating an estimated $2 million in tax revenue by 2027. However, the state will not impose licensing or regulatory requirements on these prediction markets, marking a departure from the stringent rules applied to sportsbooks, which must secure licenses and comply with state regulations.
North Carolina's approach to prediction markets invites platforms to establish a presence in the state while meeting the new tax obligation, which is significantly lower compared to the rate for sportsbooks. This approach contrasts with that of other states, where event contracts related to sports are viewed as akin to online sports wagering and subject to licensing and regulation.
The tax provisions for sports betting take effect immediately, while the prediction markets tax will start on January 1, 2027. However, uncertainties exist regarding the implementation of this tax. Following similar actions in Kentucky and Illinois, Governor Stein and state officials might face legal challenges from prediction market platforms or the Commodity Futures Trading Commission (CFTC), questioning the tax plan.
Additionally, the approved budget modifies the allocation of tax revenue from sports betting to colleges and universities in the state. Under the new budget, institutions within the University of North Carolina (UNC) System, which already receive annual payments from this pot, will now also benefit from an additional 20% of the tax revenue remaining after state allocations are met. Notably, student enrollment figures show North Carolina State University as the largest with 37,300 students, followed by UNC Chapel Hill with 32,200 students.
The maximum tax revenue each institution can receive is capped at $2.9 million annually, although extra funding is allocated for specific schools. Revenue generated from sports betting taxes also supports youth sports programs, gambling addiction treatment initiatives, and contributes to the state’s general fund. Furthermore, the budget caps the amount that the Major Events, Games, and Attractions Fund can receive at $30 million annually, despite a May 2026 Consensus Revenue Forecast predicting approximately $45.3 million for FY 2026-27.
