NC budget raises sports-betting tax, adds prediction markets

North Carolina’s new state budget raises taxes on sports-betting operators, redirects wagering revenue to public university athletics, and opens the door to taxing prediction markets.

The gambling-related changes are included in Senate Bill 257, the roughly $34 billion spending plan signed by Gov. Josh Stein.

The sports-betting changes come less than three years after lawmakers legalized online sports wagering in North Carolina. Mobile sports betting launched statewide in March 2024.

The budget raises the tax on licensed sports wagering operators from 18% to 23% of gross wagering revenue and changes how the funds are distributed.

For the 2026-27 fiscal year, legislative analysts estimate sports-wagering tax revenue will increase from $161.2 million under prior law to $206 million.

The largest beneficiary is the state’s General Fund, which is expected to receive $126.1 million from sports-wagering revenue in 2026-27. That is $50.7 million more than the previous distribution formula projected.

The budget keeps several existing distributions unchanged, including $1 million for North Carolina Amateur Sports, $2 million for gambling-addiction education and treatment through the Department of Health and Human Services, and $1 million for the North Carolina Youth Outdoor Engagement Commission.

The larger changes come in the distribution to public university athletics. The budget adds NC State University and the University of North Carolina at Chapel Hill as recipients of sports-wagering proceeds and increases projected distributions to several other UNC System athletic programs.

In 2026-27, Appalachian State, East Carolina, North Carolina A&T, North Carolina Central, UNC Asheville, UNC Charlotte, UNC Greensboro, UNC Wilmington, and Western Carolina are each projected to receive $3 million, an increase of about $400,000 per school.

NC State and UNC-Chapel Hill are also each projected to receive $3 million after being added to the distribution formula.

Beginning in the 2027-28 fiscal year, the budget creates an additional distribution category for public universities with Football Bowl Subdivision programs, including Appalachian State, East Carolina, NC State, UNC-Chapel Hill, and UNC Charlotte, capped at $2.5 million per school.

The increased use of sports-betting revenue to fund college athletics drew criticism from Robert Luddy, founder and president of CaptiveAire Systems and founder and chairman of Franklin Academy, St. Thomas More Academy, and Thales Academy.

“The state of NC is taxing gambling, a morally dubious activity,” Luddy said in a statement to Carolina Journal. “When the funds are provided, in part for UNC sports, it encourages more gambling for a purported good cause. Gambling is causing bad behavior in games, and now predictive gambling encourages nefarious individuals to bribe players, undermining the veracity of the sport.” 

A separate provision targets prediction markets by creating a 6% tax on net trading fee revenue generated by prediction-market operators, which allow users to buy and sell contracts tied to future events.

Prediction markets allow users to buy and sell contracts tied to the outcome of future events, including sports, politics, weather, economic indicators, or other measurable outcomes.

Platforms such as Kalshi and Polymarket have grown in prominence as federal regulators and states debate whether the products should be treated more like financial contracts or gambling.

Senate Leader Phil Berger, R-Rockingham, said the growth of prediction markets made the issue difficult for the state to ignore.

“It’s pretty clear that it’s something that seems to be growing both in popularity and in terms of just recognition that it’s out there,” Berger told reporters on the Senate floor. “Whether it’s something that eventually is going to take over from sports betting, I don’t know.”

The provision drew pushback from lawmakers who said the policy should not have been folded into the budget without more scrutiny.

“This was a poor decision to include this in the budget,” Rep. Pricey Harrison, D-Guilford, said during debate on the budget. “While I think it’s a great idea to raise revenue, I think this should have been more thoughtful, and we should have considered all the ramifications.” 

House Speaker Destin Hall, R-Caldwell, said North Carolinians are already using prediction-market platforms, and the state should begin addressing the issue.

“Folks were comfortable with the way sports betting had been implemented,” Hall told reporters on the House floor after the budget vote. “This didn’t seem like it was a great extension from what’s currently allowed under sports betting. And a lot of it’s going on in this state anyway, in terms of the prediction markets. So it was just time to deal with it.”

Under the budget, prediction-market operators would be taxed at a lower rate than licensed sportsbooks, which will now pay 23% on gross wagering revenue.

The prediction-market tax is projected to generate about $1 million for the state in 2026-27, with revenue expected to grow in future years as the market expands.

That difference has drawn scrutiny from critics who argue that prediction markets could compete with traditional sportsbooks while facing a lighter tax and regulatory structure.

Mick Mulvaney, executive director of Gambling is Not Investing and former White House chief of staff, criticized the provision, arguing that prediction markets should not receive different treatment from licensed sportsbooks.

“Prediction markets are unlicensed sports gambling apps, full stop,” Mulvaney said in a statement shared with Carolina Journal. “The proposed North Carolina budget legitimizes and gives a sweetheart deal to the same prediction market operators that are trampling on the state’s gambling regulations while opening a pathway for underage users to gamble on sports through prediction markets. There’s no reason a state should favor these rogue operators over the licensed sportsbooks who fully comply with regulations and tax structures.”

The budget also makes a bettor-facing tax change by allowing taxpayers who itemize to deduct up to $2,000 for gambling losses. Fiscal Research estimates the gambling-loss deduction will reduce General Fund revenue by roughly $19.7 million to $23 million annually.

“NC budget raises sports-betting tax, adds prediction markets” was originally published on www.carolinajournal.com.