North Carolina’s Sports Betting Experiment, Two Years Later

Thank you for joining us this Saturday morning.

State lawmakers legalized online sports betting over two years ago, amid much attention and controversy.

Today, we look at how the industry has performed and evolved since legalization. We’ll get right to it.  

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Online sports betting is now legal in 32 states plus Washington, DC, following a 2018 U.S. Supreme Court decision striking down a federal ban.

North Carolina’s start-and-stop journey to online sports betting began in 2022. A measure to legalize the activity passed in the Senate (amid division in both caucuses) but fell one vote shy in the House, a rare and surprising defeat for any bill that reaches the floor.

But proponents, led by then-Rep. Jason Saine, continued to negotiate and modify the bill language. It finally passed in 2023, and sportsbook operators went “live” during March Madness in 2024.

Sports betting advocates long argued that North Carolinians already indulged in gambling activity, they just did so via illegal, offshore platforms. Those arguments were seemingly confirmed following legalization. The industry smashed multi-year tax revenue projections in a matter of months. 

Betting activity has grown steadily since. “Gross wagering revenue through 11 months of fiscal year 2026 totaled $739.2 million. That produced tax revenue of $133.1 million, up 25% from the $106.1 million generated between July 2024 and May 2025,” Charlotte Business Journal reported last month.

In total, the state has collected more than $300 million in tax revenue from sports betting companies. The beneficiaries of that money are varied, reflecting the protracted negotiations and deal-making that led to legalization. 

The state Department of Health and Human Services receives $2 million annually for “gambling addiction education and treatment programs.” (The Department has argued publicly that it should receive a larger allotment.) An additional $1 million goes to youth sports grants in all 100 counties.

But the bulk of the revenue is split between UNC System athletics departments, the state’s Major Events, Games, and Attractions Fund, and the general fund.

The Major Events Fund is well-capitalized, and as the name implies, is supporting multiple major events this year. The Major League Soccer All-Star game, Pickleball National Championships, and NASCAR Race the Rock are all backed in part by the fund.

Since legalization, 13 UNC System institutions, excluding UNC and NC State, have received nearly $5 million each to support their athletics programs. The logic was that schools not named UNC or NC State do not receive as much conference and television revenue, and this funding source could support their programs. One athletic director, UNC Pembroke’s Dick Christy, called it an “absolute blessing.”

The new state budget, though, adds UNC and NC State back into the fold, allocating millions annually to the schools and upping the allocation for Appalachian State, UNC Charlotte, and East Carolina. 

The budget also makes several major changes to the sports betting landscape. It ups the tax rate licensed operators must pay from 18% to 23% – higher than neighboring states, but still below other markets like Pennsylvania, New York, and Illinois. 

The move to hike the industry’s taxes is likely a symptom of this reality, which will be hard for operators to shake: They’re not particularly sympathetic victims. Complaints abound about marketing saturation and potential social ills that gambling proliferation might bring about.

Still, the operators argue, they’re a better alternative than illicit, offshore organizations that don’t pay any taxes or abide by any state regulations.

The landscape has also become even more crowded with the entry of prediction markets, like Kalshi and Polymarket.

Unlike sports betting companies or casinos, Kalshi and Polymarket do not operate as “the house”, gamblers on these platforms bet against each other, not the company. When a winning wager is placed on FanDuel, the proceeds come out of the company’s bottom line. But on Kalshi, a user buys a share of a particular outcome. 

Take this prediction as an example: “It will rain at least one inch tomorrow.”  Users on Kalshi can either buy “yes” shares or “no” shares. The price of the shares moves according to how much money is placed on each outcome, just like stock prices rise or fall based on trading activity. So, if the forecast calls for rain, “yes” shares might cost $0.85 each, while “no” shares cost $0.15 each. At the conclusion, each share will pay out $1 or $0, depending on the outcome.

Prediction market companies argue that this is properly viewed as equity trading, not gambling. 

That argument is contested, most notably when it comes to predicting the results of sporting events. Sure, Kalshi users may be buying shares in whether the Yankees win or lose, but is that really any different than betting with FanDuel on whether the Yankees win or lose?

The answer is a hotly debated legal question that likely will not reach resolution until the U.S. Supreme Court accepts and decides on a case. In the meantime, prediction markets enjoy a much different, and more favorable, tax and regulatory structure than online sports betting operators. The recently-enacted state budget imposes a 6% tax on prediction markets, much lower than the 23% rate imposed on sports betting operators.

The question of the day: Will sports betting operators convert to prediction operators, and how will that impact revenues? 

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Two years in, North Carolina’s sports betting experiment has largely delivered what proponents promised: a legal, taxed alternative to the offshore books residents were already using. 

But the industry’s growing pains are apparent. Operators can point to their tax contributions and the offshore alternatives, but they’re still selling a product that state government has decided to tax like a vice, not a service.

The bigger threat to the industry’s current footing may not be tax rates at all, though, but competition. Prediction markets are already carving out space to offer nearly identical bets on sporting events at a fraction of the tax burden, and if that gap persists, sportsbooks will have a legitimate case that they’re being regulated out of step with a rival product. That, or sportsbooks will simply launch their own prediction markets, as some already have. 

How North Carolina, and the country, addresses that imbalance will determine how the industry evolves in the years to come.