Nevada’s attorney general has taken a firm stance in a federal appeals court, arguing that Kalshi’s acceptance of a new North Carolina tax on prediction market trading revenue confirms that states have the authority to regulate and tax such operations within their borders.
North Carolina recently enacted Senate Bill 257, which imposes a 6% tax on trading fee revenue from prediction market operators like Kalshi for activity attributable to state residents. This tax, effective from January 1, is notable because it allows federally regulated exchanges to operate legally without requiring a separate state gaming license or additional regulatory burdens.
For players and bettors, this development means that prediction markets operating in North Carolina will now be subject to state taxation, potentially influencing the cost structure and availability of these platforms. Unlike sports betting operators in North Carolina, who face a much higher 23% tax on gross wagering revenue, prediction markets are taxed at a lower rate, which may affect the pricing and fees passed on to consumers.
Meanwhile, Illinois has introduced a tiered transaction tax on sports-related exchange wagers placed on prediction markets, with rates starting at 1.75% for the first five million wagers and increasing to 3.5% thereafter. Operators must also obtain a costly state sports-betting license, which Kalshi is currently challenging in court. These varying tax regimes highlight the complex and evolving regulatory environment prediction market users must navigate depending on their state of residence.
Nevada’s Deputy Attorney General Abigail Pace emphasized in court filings that Kalshi’s acceptance of North Carolina’s tax undermines its own legal arguments against state regulation. “By embracing S.B. 257, Kalshi is admitting that a state has the power to regulate its operations in the state,“ Pace wrote. This suggests that Kalshi cannot avoid Nevada’s taxing provisions either, potentially affecting players who use Kalshi’s platform from Nevada.
For consumers and players, these legal disputes underscore the importance of understanding how state regulations and taxes may impact access to prediction markets, fees charged, and the overall user experience. Additionally, as states assert more control over these platforms, players should stay informed about any changes that could affect their ability to participate or the costs involved.
Prediction markets, which allow betting on sports, elections, and entertainment events, are increasingly subject to state-level oversight despite federal Commodity Futures Trading Commission (CFTC) regulation. This dual layer of regulation can create uncertainty for players, especially those in states with active legal challenges or new tax laws.
Players concerned about responsible gambling should also note that evolving regulations may bring enhanced consumer protections or requirements for operators to implement safer gambling measures, although such outcomes depend on specific state laws and enforcement.
For more details, see the original report from CDC Gaming. Related coverage on state betting regulations can be found in our USA and Betting sections.
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