Tar Heel State Bets on the Feds: North Carolina Hands Prediction Markets to the CFTC 🎯

North Carolina has formally aligned with federal regulators in the battle over prediction markets, enacting a law that recognizes the Commodity Futures Trading Commission's authority over platforms such as Kalshi and Polymarket. Governor Josh Stein signed the measure on July 7 as part of the state's 2026 budget, Senate Bill 257. The statute states that a prediction market registered and licensed by the CFTC "may operate lawfully" in North Carolina because the Commodity Exchange Act establishes the agency's "exclusive federal regulatory authority" over such platforms, leaving primary oversight in Washington while the state collects revenue.

The North Carolina law imposes a 6% tax on operators' net trading fee revenue attributable to North Carolina residents starting January 1, 2027, and explicitly states that the levy carries no licensing, registration or other regulatory obligations. That treatment is markedly lighter than the regime applied to traditional sports betting operators in the state: North Carolina simultaneously raised its tax on sportsbooks from 18% to 23% of gross wagering revenue. Other states have taken a more confrontational approach. 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.

North Carolina's posture 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 became the latest state to escalate the fight this week by suing Kalshi and Polymarket and accusing them of operating illegal sportsbooks. "Kalshi and Polymarket are operating illegal sportsbooks in Kentucky and breaking our laws," Attorney General Russell Coleman said in a statement. "These multi-billion dollar corporations and their legal fictions don't pass the sniff test."

Courts have split on the issue, with prediction market operators winning injunctions in New Jersey and Tennessee but losing in Maryland, Nevada and Arizona. The North Carolina law arrives days after Kalshi's most significant setback, with a New York federal judge denying Kalshi's request to block state gambling regulators and finding that the Commodity Exchange Act does not preempt New York's gambling laws as applied to its sports contracts. With rulings pointing in opposite directions, the dispute is increasingly expected to reach the U.S. Supreme Court, while the CFTC separately finalizes national rules for event contracts with a public comment period closing July 27.