North Carolina Backs CFTC Authority Over Prediction Markets in Key Regulatory Move

Key Points

• North Carolina has enacted a law explicitly recognising the Commodity Futures Trading Commission’s “exclusive federal regulatory authority” over prediction markets such as Kalshi and Polymarket.
• Governor Josh Stein signed the provision on 7 July as part of Senate Bill 257, the state’s 2026 budget legislation.
• Prediction market operators registered and licensed by the CFTC may lawfully operate in North Carolina under the new statute.
• The law imposes a 6% tax on operators’ net trading fee revenue attributable to North Carolina residents, effective from 1 January 2027.
• The statute makes clear the tax carries no separate licensing, registration or regulatory obligations.
• By comparison, North Carolina simultaneously raised its tax on sports betting operators from 18% to 23% of gross wagering revenue.
• The 6% rate is markedly lower than levies pursued elsewhere, including Kentucky’s 14.25% transaction fee tax and Illinois’s tiered transaction tax under its sports-wagering framework.
• More than a dozen states have instead sought to regulate prediction markets as unlicensed gambling, prompting the CFTC to sue at least nine states to defend its jurisdiction.
• Courts remain divided: platforms have secured injunctions in New Jersey and Tennessee but lost in Maryland, Nevada and Arizona.
• The North Carolina law follows days after a New York federal judge denied Kalshi’s request to block state gambling regulators, ruling that the Commodity Exchange Act does not pre-empt New York’s gambling laws as applied to its sports contracts.
• The CFTC is separately finalising national rules for event contracts, with its public comment period closing on 27 July.
• Legal observers increasingly expect the dispute over prediction market jurisdiction to reach the US Supreme Court.

North Carolina (Britain Today News) July 10, 2026 — North Carolina has become one of the few states in the country to formally align itself with federal regulators in the escalating national dispute over prediction markets, enacting a law that recognises the Commodity Futures Trading Commission’s authority over platforms such as Kalshi and Polymarket, rather than attempting to police them under state gambling statutes.

What Does North Carolina’s New Prediction Markets Law Actually Say?

The provision was folded into Senate Bill 257, North Carolina’s 2026 budget legislation, and signed into law by Governor Josh Stein on 7 July. The statute states that a prediction market registered and licensed by the CFTC may operate lawfully within the state, on the basis that the Commodity Exchange Act establishes the agency’s “exclusive federal regulatory authority” over such platforms. The wording places North Carolina firmly on the side of federal pre-emption in a debate that has divided state legislatures, courts and regulators across the country over the past year.

Rather than creating a parallel state licensing regime, as several other states have attempted, North Carolina’s approach effectively defers oversight to Washington while carving out a revenue stream for the state itself. The law does not impose any additional compliance, registration or reporting duties on operators beyond the federal requirements already administered by the CFTC.

Why Did Governor Josh Stein Sign This Legislation Into Law?

Governor Stein’s signature on 7 July brought Senate Bill 257 into force as part of the broader state budget package for the 2026 fiscal cycle. The bill covers a wide range of fiscal measures, with the prediction markets provision sitting alongside changes to gambling taxation more broadly. By including recognition of the CFTC’s authority within the budget rather than as standalone gambling legislation, North Carolina lawmakers effectively tied the regulatory question to a revenue-generating mechanism, allowing the state to capture tax income from a fast-growing sector without engaging in the licensing disputes that have consumed other states.

How Much Will Kalshi and Polymarket Be Taxed in North Carolina?

Under the new law, prediction market operators will pay a 6% tax on their net trading fee revenue attributable to North Carolina residents. The tax takes effect from 1 January 2027. Crucially, the statute specifies that this levy exists purely as a revenue measure and

“carries no licensing, registration or other regulatory obligations of any kind”

— language designed to reinforce that the CFTC, not any state agency, retains regulatory oversight of the platforms.

This structure allows North Carolina to benefit financially from the growth of prediction markets within its borders while avoiding the legal battles that have arisen in states attempting to impose licensing regimes on operators such as Kalshi and Polymarket.

Why Is the Prediction Markets Tax Rate So Much Lower Than Sports Betting?

The 6% rate stands in sharp contrast to how North Carolina treats traditional sports wagering. As part of the same budget legislation, the state raised its tax on licensed sports betting operators from 18% to 23% of gross wagering revenue. The gap between the two rates — 6% for prediction markets against 23% for sports betting — underscores the different regulatory categories the state is applying: prediction markets are being treated as federally regulated financial-style contracts, while sports betting remains firmly within the state’s traditional gambling framework.

This divergence is likely to draw scrutiny from traditional sportsbook operators, who now face a considerably heavier tax burden than prediction market platforms offering economically similar sports-related contracts.

How Does North Carolina’s Approach Compare With Other States?

North Carolina’s light-touch, revenue-only model is notably more permissive than the frameworks other states have pursued. Kentucky passed legislation taxing prediction market platforms at 14.25% of transaction fees — more than double North Carolina’s rate — a move that prompted a formal complaint from the CFTC. Illinois, meanwhile, has taken a different route entirely, folding prediction markets into its existing sports-wagering regulatory regime, complete with a tiered transaction tax and licensing requirements.

These contrasting approaches illustrate just how fragmented the regulatory landscape for prediction markets has become, with states choosing between three broad models: treating platforms as federally regulated entities (North Carolina), taxing them as a distinct category outside full gambling licensing (Kentucky), or absorbing them into existing sports betting regulation (Illinois).

What Happened When Kentucky Tried to Regulate Prediction Markets?

Kentucky’s attempt to tax and regulate prediction market platforms at 14.25% of transaction fees has already triggered a formal complaint from the CFTC, which argues that such state-level measures encroach on its exclusive jurisdiction under the Commodity Exchange Act. The dispute has since escalated further, with Kentucky pursuing litigation against Kalshi and Polymarket directly — the latest in a lengthening list of state-level legal confrontations over prediction markets.

Why Did Illinois Take a Different Regulatory Path?

Illinois opted to bring prediction markets under its existing sports-wagering regulatory umbrella, applying a tiered transaction tax alongside licensing rules more typically associated with traditional bookmakers. Kalshi responded swiftly by launching a legal challenge against the state’s framework, arguing that it improperly subjects a federally regulated product to state gambling law. The Illinois case adds to the growing body of litigation testing where the boundary lies between federal commodities regulation and state gambling oversight.

How Widespread Is the State Crackdown on Prediction Markets?

North Carolina’s stance remains very much the exception rather than the rule. More than a dozen states have moved to treat prediction markets as a form of unlicensed sports betting, effectively requiring platforms to seek state gambling licences or cease operating within their borders. This wave of state action has, in turn, prompted the CFTC to sue at least nine states in an effort to defend what it describes as its exclusive jurisdiction over event contracts and prediction markets under federal commodities law.

The result has been a patchwork of conflicting outcomes in the courts. Kalshi and similar platforms have secured injunctions allowing them to continue operating in New Jersey and Tennessee while their legal challenges proceed. However, they have lost equivalent battles in Maryland, Nevada and Arizona, where courts have sided with state regulators seeking to apply gambling law to the platforms.
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What Did the New York Court Ruling Against Kalshi Say?

North Carolina’s law arrives only days after Kalshi suffered what has been described as its most significant legal setback to date. A federal judge in New York this week denied Kalshi’s request to block state gambling regulators from acting against the platform. In its ruling, the court found that the Commodity Exchange Act does not pre-empt New York’s gambling laws as they apply to Kalshi’s sports-related contracts — a finding that directly contradicts the position North Carolina has just written into law.

The New York decision represents a notable divergence from the injunctions Kalshi obtained in New Jersey and Tennessee, further widening the gap between how different federal courts are interpreting the reach of the Commodity Exchange Act relative to state gambling statutes.

Is the Prediction Markets Dispute Headed to the Supreme Court?

With federal courts issuing rulings that point in starkly opposite directions — some finding federal pre-emption, others upholding state gambling authority — legal observers increasingly view the conflict as one that is likely, eventually, to require resolution by the US Supreme Court. The split among district and appellate courts over whether the Commodity Exchange Act pre-empts state gambling law as applied to prediction markets has created exactly the kind of unresolved, conflicting precedent that often precipitates Supreme Court review.

What Is the CFTC Doing to Resolve the Regulatory Uncertainty?

Separately from the state-by-state litigation, the CFTC is in the process of finalising national rules governing event contracts, the broader regulatory category that includes prediction market products offered by platforms such as Kalshi and Polymarket. The agency’s public comment period on the proposed rules closes on 27 July. Should the CFTC finalise a clear national framework, it could go some way towards smoothing over the current patchwork of state responses — though it remains uncertain whether such federal rulemaking alone would be sufficient to override the gambling statutes that several states have already applied, or are seeking to apply, to prediction market operators.

What Happens Next for Kalshi, Polymarket and Prediction Market Regulation?

For now, North Carolina’s approach offers prediction market operators a rare example of a state willing to defer entirely to federal oversight while still collecting tax revenue from the sector. Whether other states follow North Carolina’s model, align instead with Kentucky’s or Illinois’s approaches, or continue treating prediction markets as unlicensed gambling will likely depend heavily on how the ongoing litigation — and any eventual CFTC rulemaking — plays out over the coming months. With the New York ruling against Kalshi still fresh and further state legal battles under way, the question of who ultimately regulates prediction markets in the United States remains unresolved.