The prediction market sector saw a potentially groundbreaking update fly under the radar this week, with North Carolina becoming the first state to formally legitimize prediction markets under the ‘exclusive’ regulatory oversight of the Commodity Futures Trading Commission (CFTC).
Of course, everything comes at a price – which was confirmed within the North Carolina budget to be a 6% tax on all prediction market net trading revenue generated within the state’s market.
This new provision marks the first of its kind in the US, with Kentucky now being the state with the most closely related regulatory framework, as its laws demand a 14.25% excise tax on prediction market transaction fees. However, regulators in this or any other US state have yet to formally recognize the CFTC’s potential authority over such operations.
What makes the decision significant?
The fierce contention around prediction market regulation in the US market(s) is a well-trodden topic. A number of state gambling regulators and lawmakers have lobbied hard against allowing certain types of event contracts to be introduced to their respective markets – citing their glaring similarities to ‘standard’ wagering products.
Many anti-competitive, player protection and moralistic arguments have been aimed at both the prediction market sector and CFTC for allowing this form of entertainment to explode outside of the bounds of gaming regulation, all of which hold validity in their own right. What this latest story out of North Carolina shows, however, is that in some cases – it's about the money.
As if the fractured nature of the US landscape needed any more highlighting, the powers that be in the Tar Heel state have declared a 6% tax rate to be an adequate payoff for what their fellow countrymen elsewhere deem to be illegal gambling.
Indeed, prediction markets were (and are) already operating nationwide, which makes delaying the implementation of this tax a waste of unrealized potential state revenue. But the fact that just last month North Carolina Senator Jim Burgin confirmed that the state would be raising sports betting revenue taxes from 18% to 23% will make this latest ruling a tough pill to swallow for compliant operators in the sector.
Who will follow suit?
It is not a matter of if, but rather when some US states will adopt North Carolina’s newly introduced framework. The man who predicted the Wall Street crash in 2008, Michael Burry, disagrees – as he cited prediction market proliferation as a driver behind his recent investment into FanDuel and DraftKings. Still, both operators do now yield prediction market operations.
If there is one key takeaway to be learned from the whole fiasco, it is that no two states will regulate the same way
While North Carolina may have made its peace with predictions, the states that leveled cease-and-desists the way of the CFTC and its platforms – New Jersey, Nevada, Maryland and Ohio, to name but a few – are the least likely to follow the same path.
Looking ahead, the states that led the way in outlawing sweepstakes, as well as the states that yield productive land-based markets – such as Nevada, New York and New Jersey – will likely continue fighting fervently against prediction markets as unregulated gambling for some time. Gambling regions aside, the likes of states like Utah, which remains opposed to gaming of any and all types, are likely to hold their stance firmly against prediction markets.
That being said, New Jersey's Budget Committee approved new legislation this month to tax prediction market gross income at 9% and introduce responsible gaming safeguards around the products. This legislation still remains far from being passed into law, though.
Nevertheless, there is a much more interesting potential eventuality relating to unregulated gambling states – such as California or Texas – which could see them follow North Carolina’s lead and end up regulating prediction markets under the CFTC’s authority before they get anywhere near regulating gambling.
Was this always bound to happen?
There would be plenty the Tribal sector would have to say about the above theoretical outcome in a state such as California. There is also no doubt that Tribes across the US will, in partnership with the American Gaming Association (AGA) and numerous state regulators, continue to protest against sports events contracts and other forms of wagering-adjacent prediction markets for some time. But with a framework now outlined, it likely won’t be long before other states enact similar regulations.
Everything looks clearer in hindsight; and in a nation which holds such regulatory and cultural nuance across dozens of differing jurisdictions, the idea that some states would simply adopt prediction markets and some states would not seems perfectly obvious. The question of who will lean which way remains to be seen.
Hypotheticals aside, however, what is undisputably significant about North Carolina’s decision is that it will be reflected upon as the first legislative signal that a state is prepared to accept the prediction market model, rather than challenge it.
On the other side of the conversation, Minnesota became the first state to ban prediction markets entirely in May 2026
