North Carolina budget raises sports betting tax to 23%, adds prediction market levy

North Carolina Gov. Josh Stein signed the state’s $34 billion fiscal 2025-26 budget on Tuesday, raising the online sports betting tax rate and setting a separate tax for prediction market platforms.

“After careful deliberation, this morning I will sign the state budget into law,” Stein said Tuesday.

Senate Bill 257 increases the tax on online sports betting operators from 18% to 23% of gross wagering revenue, effective immediately. The increase applies to the state’s seven online sportsbooks and is the first tax hike since legal wagering launched in North Carolina in March 2024. The new rate puts North Carolina above larger sports betting markets including Massachusetts, Ohio and New Jersey.

The final increase follows months of debate. In April 2025, the state Senate proposed doubling the tax to 36%, which would have placed North Carolina among the five highest flat sports betting tax rates in the United States. That proposal failed to gain support, while lawmakers later backed a smaller increase in the 20% to 25% range before agreeing to 23%.

The budget cleared the House of Representatives on Thursday by an 88-21 vote and passed the Senate later the same day by a 35-10 vote. Sports betting operators, including FanDuel and DraftKings, opposed the state’s multi-year effort to raise the tax, while lawmakers viewed the increase as a way to help address a $2.8 billion budget deficit.

North Carolina bettors have generated more than $300 million in tax revenue under the previous 18% rate. The budget also changes how sports betting proceeds are distributed.

UNC Chapel Hill and North Carolina State University will become eligible to receive tax proceeds beginning in July 2027. NC State has 37,300 students, while UNC Chapel Hill has 32,200, making them the state’s two largest universities by enrollment.

UNC System institutions already receive annual payments from sports betting tax revenue and may receive 20% of remaining tax revenue after required state allocations. Annual payments to schools are initially capped at $2.9 million per institution, though the budget provides additional funding for certain schools.

Revenue is also allocated to youth sports programs, gambling addiction treatment programs, and the state’s general fund. The budget caps the Major Events, Games, and Attractions Fund at $30 million annually, below the $45.3 million projected for fiscal 2026-27 in a May 2026 Consensus Revenue Forecast.

North Carolina will also tax prediction markets, including platforms such as Kalshi and Polymarket, at 6% of net trading fee revenue beginning January 1, 2027. A fiscal memo projects the tax will generate $2 million in 2027.

The budget does not impose “any license, registration, or other regulatory requirements or obligations of any kind on prediction markets,” allowing trading exchanges that offer sports contracts to operate without state licensure or regulation.

North Carolina follows Kentucky and Illinois in adopting prediction market tax legislation, though similar measures have drawn legal challenges involving prediction market platforms and the Commodity Futures Trading Commission.