Kalshi may have found a new way to fight back against the growing number of states challenging its prediction market business.
A new tax arrangement in North Carolina gives Kalshi what it has been seeking throughout its nationwide legal battle. The company wanted state recognition that prediction markets can operate under a framework tied to federal oversight.
The development could become important well beyond North Carolina as Kalshi continues fighting regulators over whether its event contracts should be treated as financial products or gambling. This could be the compromise for states that want full oversight on prediction markets.
North Carolina Changes the Equation
North Carolina’s recently approved budget includes a 6% tax on fees generated by prediction market trading, with the provision taking effect in January.
That number is significant because it creates a major distinction between prediction markets and traditional sportsbooks. Sports betting operators in the state face a substantially higher tax burden, while the new framework lets prediction markets operate without the same state licensing and regulatory requirements imposed on sportsbooks.
The distinction, along with the limited taxes, gives Kalshi a significant edge over sportsbook operators.
It gives the company more evidence that states should not be able to independently shut down federally regulated prediction markets.
Kalshi has already pointed to the North Carolina legislation in ongoing litigation, arguing that the state's approach demonstrates how states can collect revenue without attempting to regulate the underlying market themselves.
Kalshi has spent much of 2026 battling states that argue its sports contracts are effectively sports betting. The results have been mixed between states.
The company has maintained that it operates as a federally regulated derivatives exchange and that the Commodity Futures Trading Commission, rather than individual state gaming regulators, should control.
The Third Circuit has sided with Kalshi in its dispute with New Jersey, while the Ninth Circuit recently reached the opposite conclusion in Nevada, finding that federal commodities law didn’t prevent Nevada from applying its gaming regulations to Kalshi's sports contracts. The split has increased the possibility of further review at the Supreme Court level.
North Carolina took a completely different approach. Instead of fighting over whether prediction markets should be treated exactly like sportsbooks, the state created a tax structure that allows the market to exist while maintaining a connection to federal oversight.
New York Could Be the Bigger Test
North Carolina may not be the only state where Kalshi tries this approach.
The company has proposed a similar arrangement in New York, where it faces a much larger legal battle. Kalshi has argued that states can receive substantial tax revenue from prediction markets without imposing state gambling regulations on federally registered exchanges.
New York has rejected that proposal, and its legal case against Kalshi is continuing.
That difference highlights the larger issue facing the industry.
Prediction markets are expanding quickly, but no nationwide agreement exists on where they fit within the existing regulatory system. This has created countless legal debates, but prediction markets have still been able to operate.
The Trade Handle Prediction Markets Take
The North Carolina development gives Kalshi another argument, but it doesn’t resolve the underlying legal dispute.
Recent court decisions have gone in different directions, and the Ninth Circuit's Nevada ruling was a significant setback for Kalshi's argument that federal oversight automatically prevents state gaming regulation.
Still, North Carolina shows another path is available, and it may be the best compromise for prediction markets.
If more states decide they would rather tax prediction market activity than fight over whether it should exist, Kalshi could gradually build a patchwork of state-level agreements while its larger legal battle continues.