NC Budget Raises Sports Betting Tax, Adds New Changes

North Carolina lawmakers have unveiled a budget proposal that would significantly reshape how the state handles sports betting revenue, increasing taxes on operators, creating a new levy for prediction market companies, and expanding the list of universities eligible to receive gambling-related funds.

The plan, released as part of the state’s proposed budget agreement, would raise the tax rate on online sports betting operators from 18% to 23%. If approved by the General Assembly and signed into law, the change would apply to gross wagering revenue generated by licensed operators.

The proposal arrives more than a year after legal online sports betting launched in North Carolina in March 2024. Since the market opened, operators have contributed more than $300 million in tax revenue to the state.

Legislators are expected to vote on the budget before adjourning for the Fourth of July holiday, according to WRAL. The spending package remains subject to final approval in both legislative chambers before reaching Gov. Josh Stein.

Universities Added to Revenue-Sharing Formula

One of the most notable changes would alter how sports betting tax revenue is distributed among public universities.

Under the existing system, the athletics departments at 13 UNC System institutions received distributions from sports wagering taxes, while the University of North Carolina at Chapel Hill and North Carolina State University were excluded despite operating two of the state’s largest athletic programs.

The proposed budget would make UNC and NC State eligible for future distributions. Appalachian State University, East Carolina University and the University of North Carolina at Charlotte would also qualify for a new Football Bowl Subdivision category.

Beginning July 1, 2027, schools in that classification could receive up to $2.5 million each through a dedicated allocation. Combined with funding available through other university classifications, qualifying schools could receive as much as $5.8 million annually, though actual payments would depend on tax revenue collections.

The revised structure creates three categories for public universities. Schools with athletic programs that primarily compete in NCAA Division I could receive up to 2.2% of available proceeds, capped at $400,000 per institution. A second category covering Division I and Division II institutions would receive 19.5% of available funds, with distributions capped at $2.9 million per university. The Football Bowl Subdivision allocation would account for an additional 5.7% beginning in 2027.

The budget specifies that athletic departments must use the money to support athletics operations and cannot redirect it to a university’s general fund.

The additional funding arrives as colleges face rising athletic expenses tied to expanded scholarships and athlete revenue-sharing obligations following recent NCAA legal settlements. Both UNC and NC State have reported financial pressures within their athletic departments in recent years.

Prior to the budget’s release, UNC athletics issued a statement saying, “As we await further information about the budget, we are grateful for the General Assembly’s leadership in providing support for our collegiate athletic programs through potential additional sports wagering revenue.”

Higher Tax Rate Proposed for Sportsbooks

The budget would increase North Carolina’s sportsbook tax rate by five percentage points, raising it to 23%.

Lawmakers considered an even larger increase in the past. The current proposal remains below Pennsylvania’s 36% sports betting tax rate, Illinois’ progressive structure that can reach 40%, and New York’s 51% rate.

Supporters of the increase say the change would generate additional state revenue. North Carolina has already collected more than $300 million in taxes from approximately $1.6 billion in online sportsbook profits since legal wagering began.

Sports betting operators have criticized the proposal, arguing that higher tax burdens could have unintended consequences.

The Sports Betting Alliance, which represents major operators, previously stated: “This tax hike will only penalize licensed, regulated companies who have delivered hundreds of millions in tax revenue to the state and the UNC System athletic departments. We urge state leaders to instead focus on strengthening the legal framework that protects players, supports jobs, and keeps illegal and unregulated operators out of North Carolina.”

FanDuel expressed similar concerns in a communication to customers, stating, “Legal sports betting is generating real revenue for collegiate athletic departments across the state. A tax hike would threaten that funding and hit fans.”

Industry representatives have warned that higher taxes on legal operators could encourage some bettors to seek alternatives outside the regulated market.

Prediction Markets and Tax Deductions Included

The proposal would also introduce a 6% tax on prediction market operators beginning Jan. 1, 2027.

The tax would apply to net trading fee revenue generated from North Carolina users rather than overall trading volume. Companies such as Kalshi and Polymarket, which allow users to trade contracts tied to future event outcomes, would fall under the new tax structure.

According to the budget language, prediction market platforms registered and licensed by the Commodity Futures Trading Commission would be permitted to operate in North Carolina without obtaining a separate state license.

The move places North Carolina among a growing number of states evaluating how to regulate and tax prediction market businesses. Illinois recently adopted a prediction market tax, while lawmakers in New Jersey have considered legislation targeting those exchanges.

The budget package includes another gambling-related change affecting individual taxpayers. For the first time, sports bettors would be permitted to deduct gambling losses from gambling winnings on state income tax returns. The change would apply retroactively to Jan. 1, 2025.

Supporters have described the measure as a fairness issue for taxpayers who currently pay taxes on winnings without being able to offset losses.

Revised Distribution Model for Gambling Revenue

The proposal would also modify several existing allocations funded through sports betting taxes.

Under the current system, the first $8.4 million in tax revenue supports administrative expenses, gambling addiction treatment and education programs, youth sports initiatives and annual distributions to university athletic departments.

The revised model would continue to provide funding for state administration and gambling addiction programs while restructuring other allocations.

The Department of Revenue could retain up to $500,000 annually for administrative purposes. Gambling addiction treatment and education programs would continue receiving $2 million. Youth sports initiatives would receive dedicated funding, and the Major Events, Games and Attractions Fund would continue receiving support, capped at $30 million annually. Any remaining revenue after the required distributions would be directed to North Carolina’s General Fund.

The budget represents the most extensive set of sports wagering policy changes proposed in North Carolina since legal online betting launched in 2024. If approved, the new tax rates, university funding structure and prediction market provisions would reshape how gambling-related revenue is collected and distributed across the state.