North Carolina Raises Sports Betting Tax to 23% and Adds New Prediction Market Levy

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

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

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 marks the first tax hike since legal wagering launched in North Carolina in March 2024. The new 23% rate puts North Carolina above larger sports betting markets including Massachusetts, Ohio and New Jersey.

A Smaller Increase Than Originally Proposed

The final number follows months of back-and-forth in the legislature. Back in April 2025, the state Senate had proposed doubling the tax to 36%, which would have placed North Carolina among the five highest flat sports betting tax rates in the country. That proposal failed to gain traction, and lawmakers later coalesced around a smaller increase in the 20% to 25% range before ultimately settling on 23%.

The budget cleared the House of Representatives by an 88-21 vote and passed the Senate by a 35-10 margin. Sports betting operators, including FanDuel and DraftKings, opposed the state’s multi-year push to raise the tax, while lawmakers framed the increase as a tool to help close a $2.8 billion budget deficit. North Carolina bettors have generated more than $300 million in tax revenue under the previous 18% rate.

Where the Money Goes

The budget also changes how sports betting proceeds get distributed. UNC Chapel Hill and North Carolina State University will become eligible to receive tax proceeds beginning in July 2027, with NC State’s 37,300 students and UNC Chapel Hill’s 32,200 students 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 revenue after required state allocations, with annual payments initially capped at $2.9 million per institution.

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

Prediction Markets Get Taxed, But Not Regulated

In a notable first for the state, North Carolina will also tax prediction markets, including platforms like Kalshi and Polymarket, at 6% of net trading fee revenue beginning January 1, 2027. A fiscal memo projects the new levy will generate $2 million in 2027. Importantly, the budget does not impose any license, registration or other regulatory requirements on prediction markets, allowing trading exchanges that offer sports-related contracts to continue operating in the state without direct state licensure or oversight.

North Carolina follows Kentucky and Illinois in adopting prediction market tax legislation, though similar measures elsewhere have already drawn legal challenges involving prediction market platforms and the Commodity Futures Trading Commission. Bettors in the state looking to compare sportsbook options under the new tax structure can check out our North Carolina Sports Betting page for the latest promo codes and operator details.