Proposed state budget would legitimize prediction markets in North Carolina
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A provision in North Carolina's proposed state budget that would authorize prediction markets is fueling some criticism, with one group calling it a "sweetheart deal" for prediction market companies.
Why it matters: Prediction markets are currently regulated at the federal level, which treats them as futures contractors rather than gambling sites.
- But critics say futures contracts are no different than gambling and should be regulated state-by-state, Axios previously reported.
- They include North Carolina Attorney General Jeff Jackson, who co-signed a letter in April pushing back on the federal regulatory framework for prediction markets.
- Jackson has not responded to a request for comment from Axios.
Driving the news: The Republican-authored budget, which has been sent to Gov. Josh Stein's desk, would make North Carolina the first U.S. state to authorize prediction markets licensed by the Commodity Futures Trading Commission, according to analysts.
- It doesn't impose regulatory requirements on prediction market companies but does tax their net trading fee revenue at 6%.
- That's far less than the 23% rate that sports gambling companies would be taxed at under the same budget.
Zoom in: You can trade contracts on nearly anything on prediction market apps, including sports outcomes, world events, political votes and even the weather.
- Some sports wagers appear indistinguishable from those available on sports gambling apps.
What they're saying: House Speaker Destin Hall told reporters last week that with prediction market apps like Kalshi or Polymarket growing in popularity, it was "just time to deal with it."
- "Whether it's something that eventually is going to take over from the sports betting, I don't know," Senate leader Phil Berger said separately.
- Kalshi declined to comment to Axios on the new provision.
- A spokesperson for Polymarket said it complies with regulations under the Commodity Futures Trading Commission. "[S]tate-level efforts to regulate prediction markets will likely face significant federal preemption challenges," the spokesperson added in a statement.
The other side: "Prediction markets are unlicensed sports gambling apps — full stop," Mick Mulvaney, executive director of the group Gambling Is Not Investing and President Trump's former acting chief of staff, said in a statement.
- "The proposed North Carolina budget legitimizes and gives a sweetheart deal to the same prediction market operators that are trampling on the state's gambling regulations while opening a pathway for underage users to gamble on sports through prediction markets," he added.
- "I don't know who their lobbyists are, but congratulations. That's just rich," state Sen. Julie Mayfield (D-Buncombe) said before voting for the budget last week.
What's next: Revenue would begin being taxed Jan. 1 if the budget becomes law.
Editor's note: This story has been corrected to reflect that Sen. Julie Mayfield voted for the budget (not against it).