North Carolina backs CFTC authority over prediction markets
North Carolina has formally recognized the Commodity Futures Trading Commission's authority over prediction markets, establishing a favorable tax framework as conflicting state rulings push the regulatory clash toward the Supreme Court.
Governor Josh Stein signed Senate Bill 257 on July 7 as part of the state's 2026 budget, explicitly recognizing the Commodity Futures Trading Commission's "exclusive federal regulatory authority" over platforms like Kalshi and Polymarket. The statute dictates that any prediction market properly registered and licensed by the CFTC may operate lawfully in North Carolina. Crucially, the law strips away any state-level licensing, registration, or other regulatory obligations.
For operators and their investors, the financial architecture of the North Carolina law is notably favorable. The state will levy a 6% tax solely on operators' net trading fee revenue attributable to North Carolina residents, effective January 1, 2027. This net-revenue model contrasts sharply with the burden placed on traditional bookmakers in the same legislation, which raised the tax on sports betting operators from 18% to 23% of gross wagering revenue.
North Carolina's deliberate decision to defer to Washington makes it an outlier in a rapidly fragmenting regulatory landscape. More than a dozen states have moved to classify prediction markets as unlicensed sports betting, creating a compliance nightmare for platforms. The CFTC has responded aggressively, filing lawsuits against at least nine states to defend its jurisdiction. Kentucky's decision to tax platforms at 14.25% of transaction fees triggered one such lawsuit, while Illinois' move to absorb prediction markets into its sports-wagering regime prompted immediate litigation from Kalshi.
The legislative clarity in North Carolina lands just days after a major judicial setback for the prediction market industry. A New York federal judge denied Kalshi's request to block state gambling regulators, ruling that the Commodity Exchange Act does not preempt New York's gambling laws as applied to sports contracts. This decision compounds a deepening national divide in the courts.
Federal judges have issued completely contradictory rulings on the preemption issue. While platforms successfully secured injunctions against state enforcement in New Jersey and Tennessee, they have lost similar battles in Maryland, Nevada, Arizona, and now New York. For market participants, this circuit split represents the primary operational risk, as it guarantees prolonged legal uncertainty and heavily increases the likelihood that the U.S. Supreme Court will eventually be forced to settle the boundary between federal commodities law and state gambling statutes.
A final resolution from the high court may not be necessary if the CFTC successfully finalizes its own regulatory framework. The agency is currently crafting national rules for event contracts designed to standardize oversight and potentially override the state-by-state patchwork. The public comment period for those proposed rules closes on July 27.
