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Governor Josh Stein has signed North Carolina’s $34‑billion state budget into law, bringing major changes to the state’s gambling industry.
The budget introduces a long‑awaited provision allowing sports bettors to deduct gambling losses on state taxes. North Carolina had previously stood out as one of the few states that did not permit such deductions, leaving players taxed on gross winnings.
Under the new law, deductions apply retroactively to January 1, 2025, meaning taxpayers can claim losses from the past year. The budget also comes with an increased tax rate for sports betting operators and a fresh one for prediction markets.
“After careful deliberation, this morning I will sign the state budget into law,” Stein announced on Tuesday.
Operators to face higher costs under new framework
Sportsbooks must now issue W‑2G forms to customers whose annual winnings reach $2,000 with a single operator, tightening reporting requirements.
While bettors gain some relief, operators like FanDuel and DraftKings face a steeper tax rate. The budget raises the levy on sportsbook revenue from 18% to 23%, the first increase since legal wagering began in March 2024.
Lawmakers argued the hike was necessary to help close the state’s budget gap, noting that sports betting has already generated more than $300 million in tax revenue at the lower rate.
Beyond sportsbooks, the budget also introduces a 6% tax on prediction market operators despite companies like Kalshi and Polymarket arguing that their operations fall under federal oversight, not state regulation.
Whether North Carolina can enforce this new tax remains uncertain, but the move places the state alongside Illinois, Iowa, and New Jersey, which have pursued similar measures.
Universities to benefit from new revenue
The budget changes how the new sports betting revenue will be distributed. For the first time, the University of North Carolina at Chapel Hill and NC State University will receive a share of tax proceeds, joining Appalachian State, Charlotte, and East Carolina.
Each institution could collect up to $5.8 million annually. Previously, the state’s largest public universities were excluded from the funding model, with revenue directed to other schools in the system.
The House passed the budget by an 88‑21 vote, followed by Senate approval at 35‑10, clearing the way for Stein’s signature. The new tax rate places North Carolina above larger markets such as Massachusetts, Ohio, and New Jersey.
