North Carolina lawmakers approved a roughly $34 billion budget that would raise the state’s sports-betting tax and create a new levy on prediction-market trading fees, then sent the package to Gov. Josh Stein. The budget also folds in a gambling-loss deduction for state income taxes.
The plan arrived after a long budget stalemate. Carolina Public Press reported that North Carolina had gone more than 1,000 days on the budget passed in 2023 after lawmakers failed to agree in 2025, before the new deal cleared both chambers.
The House and Senate passed the budget in bipartisan votes, but the reported tallies differ. Carolina Public Press put the votes at 92-23 in the House and 37-12 in the Senate, while SportsBettingDime reported 88-21 and 35-10.
At the centre of the package is a higher tax on online sports wagering. The budget raises the rate from 18% to 23%, a change that would hit the eight licensed operators that currently pay tax on gross wagering revenue.
According to the North Carolina State Lottery Commission, those operators contributed more than $133 million in tax revenues in fiscal 2026. At the new rate, the state would have taken in more than $170 million over the same period.
Talk of a higher rate has been building since 2025, when Senate members put a 36% increase in their own budget proposal. The House did not back an increase then, and the final budget document left it out.
The budget also rewrites how some wagering money is shared with public universities. The legislative fiscal memo for Senate Bill 257 says Section 44.7(b) changes the distribution of sports-wagering proceeds, caps the North Carolina Major Events, Games and Attractions Fund at $30 million a year, and adds N.C. State and the University of North Carolina at Chapel Hill as recipients.
Under current arrangements described in the reporting, 13 other UNC schools already receive sports-betting dollars, but UNC and NC State do not. The new setup would send 2.2% of sports-betting revenues to Division I public universities, 19.5% to Division II public universities and 5.7% to public universities with FBS football, with annual caps of $400,000, $2.9 million and $2.5 million per school.
SportsBettingDime said UNC and NC State would begin receiving revenue on July 1, 2027, while the fiscal memo describes the distribution change as effective July 1, 2026. The differing dates appear in separate accounts of the same budget language.
A separate section creates a 6% tax on CFTC-licensed prediction-market operators, based on net trading fee revenue apportionable to North Carolina. The budget does not impose new licence, registration or other state regulatory requirements on those platforms.
That provision drew criticism from Senate Democrats. Sen. Michael Garrett said, according to NC Newsline, that lawmakers were “building them the exit ramp ourselves,” while Senate leader Phil Berger said the business models were different and the state needed to start somewhere.
NC Newsline also reported that Sen. Brent Jackson said the prediction-market tax was added after budget negotiators had finished and that he could not say who requested it, though he said it came from the House. The reporting named Kalshi and Polymarket as examples of the kind of platform affected.
The budget also lets North Carolina gamblers deduct losses against winnings on state income taxes, mirroring federal itemized deductions. The fiscal memo estimates that change would reduce General Fund revenue by $40.3 million in FY 2026-27 and by $19.7 million to $23 million in each of the following four years.
The memo says taxpayers who itemize could deduct gambling losses up to the extent allowed under federal tax law, and that the change could apply retroactively to tax year 2025. It also says the estimate was built from North Carolina Lottery Commission data on sports-wagering winnings and assumes losses deducted do not exceed winnings.
The federal backdrop changed last July, when President Donald J. Trump’s One Big Beautiful Bill Act altered the Internal Revenue Code so that only professional gamblers can deduct 90% of their losses in a year, down from 100%. North Carolina’s proposal would move in a different direction by restoring a state deduction for itemizers.
Stein has until July 12 to sign the budget, veto it, or let it become law without his signature.
