Nevada’s attorney general has informed a federal appeals court that Kalshi’s acceptance of a North Carolina tax on its trading revenue confirms that states hold authority to regulate prediction markets within their jurisdictions. This legal position carries practical implications for players using prediction market platforms, indicating that state taxes and regulations may increasingly apply, potentially affecting fees and access.
North Carolina recently enacted Senate Bill 257, which imposes a 6% tax on trading fee revenue from prediction market operators like Kalshi for activity linked to state residents. The legislation also explicitly allows federally regulated exchanges to operate legally without requiring additional state gaming licenses or regulatory burdens. This tax rate contrasts sharply with the 23% tax sports-betting operators face on gross wagering revenue in North Carolina.
In filings submitted to the Ninth Circuit Court of Appeals, Nevada Deputy Attorney General Abigail Pace argued that Kalshi’s acceptance of North Carolina’s tax undermines its own legal claims that states cannot regulate or tax its operations. “By embracing S.B. 257, Kalshi is admitting that a state has the power to regulate its operations in the state,“ Pace wrote. She further noted that Kalshi’s attempt to differentiate between regulation of contracts and taxation is a formal distinction, as both represent forms of state regulation.
For players, this means prediction market platforms may face increasing state-level oversight and taxation. Such developments could influence the cost of using these platforms and the legal protections available. For instance, Illinois has introduced a tiered transaction tax on sports-related exchange wagers placed on prediction markets and requires operators to obtain costly sports-betting licenses. Kalshi is currently challenging Illinois’ law in court.
These regulatory moves suggest that prediction markets covering sports, elections, and entertainment events are becoming subject to traditional gambling regulations and taxes. Players should be aware that state laws may indirectly affect the fees they pay and the regulatory frameworks governing their activities.
Kalshi has not yet publicly responded to Nevada’s recent filing. The ongoing legal dispute centers on whether federal Commodity Futures Trading Commission (CFTC) oversight preempts state regulation or whether states retain authority to tax and regulate prediction market activity within their borders.
Players concerned about consumer protections and responsible gambling should monitor these developments closely. Clearer state regulations could lead to stronger safeguards but might also result in higher costs or restricted access depending on local laws. For more on responsible gambling, see our dedicated coverage on Responsible Gambling.
Prediction market operators like Kalshi currently operate under a complex regulatory environment. North Carolina’s law codifies federal CFTC oversight while simultaneously asserting state taxing authority. This dual approach may set a precedent for other states considering how to regulate and tax prediction markets.
Players using these platforms should stay informed about state-specific rules that may affect their experience. For broader context on US gambling regulation and its impact on players, visit our sections on USA and Betting.
The full details of North Carolina’s legislation and Nevada’s legal arguments are available via CDC Gaming.
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