North Carolina law clears path for CFTC regulated prediction markets

North Carolina has become the first U.S. state to explicitly recognize the CFTC’s authority over prediction markets while setting a 6% state tax on their trading fee revenue.

Under Senate Bill 257, signed by Governor Josh Stein on July 7 as part of North Carolina’s 2026 budget, platforms registered with the Commodity Futures Trading Commission, including Polymarket and Kalshi, can operate lawfully in the state. 

The legislation also states that the Commodity Exchange Act gives the CFTC “exclusive federal regulatory authority” over prediction markets.

Taking effect on Jan. 1, 2027, the new law will tax prediction market platforms at 6% of their net trading fee revenue generated from North Carolina residents. The same budget legislation raises the state’s tax on sports betting operators from 18% to 23% of gross wagering revenue, creating a substantially different tax treatment for the two industries.

The legislation stands apart from actions taken in several other states, where regulators have sought to bring prediction markets under state gambling laws, particularly for sports-related event contracts. Those efforts have triggered lawsuits involving both the CFTC and prediction market operators, who argue that federal law governs their markets.

North Carolina’s position also contrasts with measures adopted elsewhere. Kentucky approved legislation requiring prediction market platforms to pay 14.25% of transaction fees, prompting the CFTC to sue the state. 

Illinois, meanwhile, folded prediction markets into its sports betting framework by requiring state licensing and introducing a tiered transaction tax of 1.75% on the first five million exchange wagers each fiscal year and 3.5% thereafter. Kalshi has challenged Illinois’ approach in court.

Legal pressure continues elsewhere

The North Carolina law comes as Kalshi continues to fight state regulators over the legal status of its sports event contracts.

Earlier this week, Judge Analisa Torres of the U.S. District Court for the Southern District of New York denied Kalshi’s request for a preliminary injunction that sought to stop New York from enforcing its gambling laws against the platform. As crypto.news previously reported, the ruling allows the case to move forward while rejecting, at this stage, Kalshi’s argument that the Commodity Exchange Act preempts New York’s gambling rules.

Following the decision, sports law attorney Daniel Wallach said the order would likely hurt Kalshi’s legal challenges against other states. According to Wallach, the court also concluded that the CFTC’s exclusive jurisdiction under the Commodity Exchange Act “is not without limits” and reaffirmed that gambling regulation has traditionally been a matter of state concern.

Kalshi has appealed the New York ruling to the U.S. Court of Appeals for the Second Circuit, while the legal dispute between federally regulated prediction markets and state gambling regulators continues to play out across multiple jurisdictions.