North Carolina got “hoodwinked” on prediction market gambling
The North Carolina legislature recently voted to legalize sports gambling on so-called “prediction markets” like Kalshi and Polymarket. The controversial provision was buried on page 626 of the state budget. As a former governor and United States attorney, I believe North Carolinians should be alarmed that there was zero public debate about a blatant political favor that benefits companies repeatedly accused of operating illegally. Especially when that favor could cost taxpayers dearly by wreaking havoc on the state’s finances.
In 2024, North Carolina legalized online sports betting, generating more than $132 million in tax revenue in its first full year. Those funds support public programs across the state, including youth, amateur and collegiate sports, as well as gambling addiction education and treatment. Tribal governments, including the Catawba Indian Nation, have also long operated sports betting as a means of promoting economic independence and self-sufficiency. Licensed operators must comply with strict consumer protection requirements, including responsible gaming measures, integrity safeguards, and age verification. In North Carolina, the legal age to place a sports bet is 21.
The same year North Carolina legalized state-regulated sports betting, so-called “prediction market” operator Kalshi told a federal court: “as the legislative history directly confirms, Congress did not want sports betting to be conducted on derivatives markets.” Yet in 2025, Kalshi abruptly reversed course and began offering sports betting. They do so while evading state and tribal law. Today, sports gambling has swelled to roughly 80% of Kalshi’s total “trading volume.”
Perhaps most insidious is that “prediction markets” evade gaming laws by claiming that their sports bets are an investment tool, rather than gambling. They use euphemisms like “sports events contracts” to try and hoodwink Congressional representatives, state legislators, attorneys general, and the courts. But look at their advertising to American consumers: they claim to have legalized “sports betting” in all 50 states. Yes, they called it betting – not investing – because it is. Furthermore, they classified themselves as “gambling” in their federal trademark request.
This would be laughable if it weren’t so dangerous to conflate the idea of using sports betting – a form of entertainment – to pay your rent or afford groceries.Parents and grandparents should be particularly concerned to know that “prediction markets” advertise toward teenagers and offer gambling to 18-year-olds. To date, teens have wagered billions gambling on these platforms.
More than 40 state attorneys general, including North Carolina’s Jeff Jackson, have recognized this farce for what it is: illegal gambling without the consumer protections provided by the state- and tribal-regulated market. Polling shows at least 81% of American voters believe that “sports event contracts” are indistinguishable from sports gambling and should be regulated at the state and tribal level like every legal operator.
The American Gaming Association estimates that since they launched sports betting, prediction markets have already siphoned more than $1.2 billion in potential gaming tax revenue away from state coffers that could have funded critical education, infrastructure, and civic projects across America.
The North Carolina legislature decided to do something jaw dropping: install a 6% tax rate on net revenues for sports betting on “prediction markets.” They did this while raising the rates on legal, state-regulated sports betting operators to 23%.
It begs the question: what business would want to pay a 23% tax to offer sports betting when they could pay a 6% tax? Mick Mulvaney, who previously served as Director of the Office of Management and Budget under President Trump, suggested that this could lead to legal sportsbooks reclassifying themselves as “prediction markets.” He suggested that move could blast a $100 million hole in the state budget! Furthermore, “prediction markets” may be quiet now to avoid scrutiny, but they will likely later argue that federal law blocks state taxes on sports betting as they have already done in Kentucky.
The bottom line: the “prediction markets” are bad actors. They advertise sports gambling as an investment and refuse to follow state and tribal law like every legal operator. North Carolina has set a horrible precedent: rewarding bad behavior while undermining the state’s authority and putting North Carolina consumers at risk.
The good news: this mistake can still be fixed. The legislature can and should pass a legislative correction before the prediction market provisions go into effect, revoking this eleventh-hour insert and ensuring that sports betting is only permitted through legal operators who adhere to state-based regulations. That would be a gigantic win for taxpayers and the rule of law.
You may remember our coverage of all that gambling industry PAC spending in the March primaries for the General Assembly. You may also remember that the General Assembly – in their recently approved grossly overdue budget — pledged to be hands-off on prediction market gambling (which is a major component of the business plan of the out-of-state guys who spent all that money getting North Carolina legislators elected and reelected).
