North Carolina affirms CFTC preemption for prediction markets

North Carolina Governor Josh Stein signed Senate Bill 257 on July 7 as part of the state's 2026 budget. The law states that registration with the Commodity Futures Trading Commission allows prediction market platforms to operate lawfully in North Carolina and identifies the Commodity Exchange Act as the source of exclusive federal regulatory authority over those markets.

SB 257 imposes a 6% tax on net trading fee revenue attributable to North Carolina residents, effective Jan. 1, 2027. The statute treats platforms that register with the CFTC as operating under the federal framework rather than under state gambling statutes.

The measure applies to event-contract platforms, including those that offer markets on political, economic and other outcomes. The law was enacted alongside an increase in the tax on sports betting operators, which the budget raised from 18% to 23% of gross wagering revenue.

Kentucky's legislature passed a separate measure requiring a 14.25% levy on transaction fees for similar platforms, which prompted a complaint from the CFTC. Illinois incorporated prediction markets into its sports wagering rules, imposing a tiered transaction tax and state licensing requirements; one platform has challenged that approach in court.

A federal judge recently denied a platform's request for a preliminary injunction to block New York regulators from enforcing state gambling rules; the platform has appealed to the U.S. Court of Appeals for the Second Circuit. Daniel Wallach, a sports law attorney, described the New York ruling as likely to harm the platform's cases against other states.

The North Carolina law specifies that CFTC registration offers a clear regulatory path for exchanges to accept event contracts without state gaming licenses. The legislation sets the tax on a net-fee basis and delays its start until calendar year 2027 to allow platforms time to adjust reporting and compliance.