North Carolina Shows Support for Federal Prediction Market Oversight

North Carolina has become the latest state to weigh in on the legal status of prediction markets. By taxing the segment, it has become the first state to recognize the federal government's authority over it. 

Gov. Josh Stein signed Senate Bill 257 on July 7 as part of the state's 2026 budget package. The measure explicitly acknowledges that the Commodity Futures Trading Commission (CFTC) holds exclusive federal authority over platforms like Polymarket and Kalshi. 

Rather than fighting to bring these exchanges under state gambling law, North Carolina's legislation states that CFTC registration alone is enough for prediction market apps to operate lawfully within its borders. 

The law also sets a tax structure for these platforms. Starting January 1, next year, prediction market operators will owe 6% on net trading fee revenue tied to North Carolina residents, a considerably lighter rate than the 23% tax the state now applies to gross North Carolina sports betting revenue, up from 18%. 

This stands in contrast to states pursuing a more adversarial path. Kentucky passed a law requiring prediction market platforms to pay 14.25% of transaction fees, prompting a lawsuit from the CFTC. Illinois folded these markets into its existing Illinois sports betting wagering tax and licensing system, a decision Kalshi is now contesting in court. 

Meanwhile, a federal judge in New York recently declined to block state regulators from enforcing gambling laws against Kalshi, a ruling one sports law attorney said could weaken the company's broader legal position in other states. North Carolina's approach signals that not every state views prediction markets as a threat that requires aggressive regulation. 

Michigan takes the opposite stance

North Carolina's hands-off approach isn't shared everywhere. In Michigan, a judge has moved to shut down Kalshi's sports contracts, at least for now. Ingham County Circuit Court Judge Rosemarie Aquilina signed the order on June 29. 

The ruling bars the company from letting Michigan users open sports positions while a state lawsuit plays out. Attorney General Dana Nessel brought that lawsuit back in March, arguing Kalshi is running an unlicensed sports betting business under the cover of trading contracts. 

The practical effect showed up almost immediately in the app. Michigan users trying to place sports trades are met with a notice saying the option isn't available to them right now, and Kalshi followed up with an email pointing to the court order as the reason. 

For its part, Kalshi isn't backing down. A spokesperson said the company thinks the ruling is wrong and intends to keep fighting it in court. Michigan is now one of several states that have pursued Kalshi over its sports offerings through litigation rather than legislation. 

The restraining order has no expiration date set in the current proceedings, so it remains active as the case works its way through the system, with the next court date scheduled for July 13.