TLDR
- Governor Josh Stein signed North Carolina’s $34 billion state budget into law on July 8, 2026.
- Sports betting operators will now pay a 23% tax on revenue, up from 18%.
- The budget adds a new 6% tax on prediction market operators such as Kalshi and Polymarket.
- Bettors can now deduct gambling losses on state taxes, retroactive to January 1, 2025.
- The new rules take effect January 1, 2027, and could lead to legal disputes over state versus federal authority.
Governor Josh Stein has signed North Carolina’s $34 billion state budget into law. The budget brings several changes to how gambling is taxed in the state.
Sports betting operators will now pay a tax rate of 23% on their revenue. That is up from the previous rate of 18%. It marks the first increase since legal sports betting began in the state in March 2024.
The budget also creates a new tax for prediction market operators. Companies like Kalshi and Polymarket will now pay a 6% tax on their net trading revenue in North Carolina.
What Changes for Bettors
Bettors in North Carolina will get one piece of good news. They can now deduct gambling losses when filing state taxes.
This deduction applies retroactively to January 1, 2025. That means people can claim losses from the past year and a half.
North Carolina had been one of the few states that did not allow this kind of deduction. Bettors were taxed on their full winnings, even if they lost money overall.
Sportsbooks also face a new reporting rule. They must send tax forms to any customer who wins $2,000 or more with a single operator in a year.
Prediction Markets Face New Tax Without New Rules
The budget does not create a licensing or regulatory system for prediction markets. This sets North Carolina apart from states like Kentucky and Illinois, which paired their taxes with new regulations.
Kalshi and Polymarket have argued that prediction markets fall under federal oversight, not state control. It is not yet clear if North Carolina can enforce its new tax on these companies.
The federal government has already taken legal action over similar tax laws. The Commodity Futures Trading Commission sued Kentucky and Illinois earlier this year. The agency says those states are trying to regulate markets that fall under federal law.
Kalshi has also filed its own legal challenge against Illinois over its tax rules. It is possible North Carolina could face similar legal pushback.
North Carolina’s approach is different in one way. Unlike states that tried to block prediction markets, North Carolina has allowed them to operate while taxing their revenue.
The new sports betting tax places North Carolina above states like New Jersey, Massachusetts, and Ohio. It follows a pattern seen across the country in recent years.
Illinois raised its sports betting tax structure in both 2024 and 2025. New Jersey raised its online sports wagering and iGaming taxes last year. Maryland and Louisiana also raised their tax rates on sports betting.
Lawmakers in North Carolina said the higher tax rate would help close a gap in the state budget. Sports betting had already brought in more than $300 million in tax revenue under the lower rate.
The budget also changes how gambling tax money gets shared with universities. UNC Chapel Hill and NC State will now receive funding for the first time.
Each school could receive up to $5.8 million per year. Four other schools, including Appalachian State and East Carolina, will also continue receiving funds.
The budget passed the House by a vote of 88-21. The Senate approved it 35-10 before it reached the governor’s desk.
The new tax rates take effect on January 1, 2027.
