North Carolina’s new state budget includes some significant changes for the gambling industry. The tax on sportsbook gross wagering revenue will increase from 18% to 23%, while prediction markets will, for the first time, pay a 6% tax on net trading fee revenue. The budget also tweaks where the revenue collected from gambling companies will go.
Both profit models exploit gambling addiction. But prediction markets are less regulated than sportsbooks in North Carolina. Here’s a breakdown of what’s changing, what it means for North Carolina, and who’s driving the changes.
How They Work
A sportsbook makes money by pricing bets so that the house inevitably makes money over time. You bet against the house, not against other players, and the house rigs the odds of the game.
Consider a coin flip. When you call heads or tails, you have a 50/50 chance of being right. A “fair” bet would reflect the true odds of the event. That means you would bet $1.00 for the chance of winning $1.00.
Sportsbooks make money by assigning unfair prices to the odds. For example, if you bet on coin flips, you would pay $1.10 for the chance at winning $1.00. Because a coin flip has 50/50 odds, you would expect to win half the time and lose half the time over many bets. In a fair scenario, you would ultimately break even: you’d win $1.00 half the time, lose $1.00 half the time, and end up where you started.
If you’re paying $1.10 for a chance to win $1.00, then after ten wins and ten losses, you’d have lost $11.00 and won $10.00. The house makes a 10% profit and you lose a dollar.
Prediction markets make money by charging you fees every time you place a bet. You bet against other players, not against the house. Prediction market operators don’t care who’s right, or what the odds are–they make money as long as people are betting, regardless of outcome.
How They’re Taxed and Where It Goes
The regulations on both types of gambling are insubstantial..
Sportsbooks are regulated at the state level by the State Lottery Commission. Mobile sportsbook operators are required to partner with in-state professional sports teams, leagues, or venues. They also have to work with the Lottery Commission to give gamblers the option of barring themselves from betting.
Prediction markets are not regulated at the state level.
The sportsbook ecosystem includes three different kinds of license fees paid to the government:
- a $1,000,000 license fee for the operator’s license, valid for five years, with the option of another $1,000,000 to renew
- A $50,000 service fee for companies that provide operators with services (like payment processing)
- A $30,000 supplier license for vendors selling inputs to the operators (like live stats)
Originally, sportsbook operators paid 18% of their gross (not net!) wagering revenue in state taxes. The new state budget increased the tax to 23%.
North Carolina gamblers wagered $6.4 billion in Fiscal Year 2025 (July of 24 through June of 25). Sportsbook operators earned gross wagering revenue of around $650 million, which resulted in $116 million of state revenue. In Fiscal Year 2026, North Carolinians wagered about $7.4 billion, which produced a gross wagering revenue of about $800 million for sportsbook operators and about $143 million for the state.
$2 million annually goes to gambling addiction treatment. An additional $2 million annually goes to youth sports programs. The rest goes to the Major Games, Events, and Attractions fund, to college athletics, and to the state’s general fund.
Prediction markets have not yet created any tax revenue. They will pay 6% of their net trading fees to the state. They will not, under current law, be required to seek licensure – and therefore will not pay any licensing fees.
We’ve Got A Gambling Problem
Gambling was first legalized in North Carolina in 2023. Between 2022 and 2024, gambling operators funneled more than $3 million to North Carolina politicians, coinciding with major lobbying campaigns to shape gambling legislation. As campaign finance reports come out in the wake of the new budget, we’ll be able to see what kind of contributions may have flowed to North Carolina legislators during the same period that the new sportsbook and prediction market legislation was written.
Gambling is a problem for North Carolina. The Republican legislature has pursued an aggressive revenue reduction program by decreasing personal and corporate income taxes. Legalized gambling will ostensibly help plug the gap. But this is a bad, unfair system of funding public goods. It sucks revenue from people with a medically-recognized addiction instead of developing a taxation system that asks everyone, including the rich, to pay their fair share for the privilege and pleasure of living in a safe, democratic society.
We can develop a sound fiscal footing for the state of North Carolina without encouraging gambling addiction. Unfortunately, this budget weakens our fiscal position and shifts some of the responsibility for closing that gap onto gamblers.
