North Carolina legislators have enacted a new law requiring sportsbooks to inform the state tax department about customers who win $2,000 or more annually. This decision follows another recent legislative action to increase the online sports betting tax rate from 18% to 23%. Opponents warn that such changes may drive bettors toward offshore sportsbooks and prediction markets with less stringent tax obligations.
Recent legislation in North Carolina indicates a tightening of regulations within the state’s sports betting sector. The new law mandates an increase in taxes on gross revenue and obliges sportsbooks to report any bettor winning $2,000 in a year for tax calculations. The Duke Blue Devils’ dedicated fans, known as the Cameron Crazies, continue to support their team while lawmakers in Raleigh potentially diminish the appeal of North Carolina’s legal sports betting landscape. (Image: Getty)
This week, Senate Bill 595 passed the North Carolina General Assembly, receiving a 27-18 vote from the Senate and a 106-11 vote from the House. Governor Joel Stein (D) was presented with the bill this morning.
If signed by the governor, SB595 will empower the NC Department of Revenue to require online sportsbooks to report details about customers who have won $2,000 in the previous calendar year.
According to the bill, “An interactive sports wagering operator must provide the information to the DOR Secretary when the Secretary requests the information.” The required data would encompass the bettor’s name, tax identification number, mailing address, and any other identifying information. Additionally, the sportsbook must provide the customer’s win/loss statement.
‘Outrageous’ Legislation
Unlike most states, North Carolina does not allow individuals filing itemized tax returns to deduct their gambling losses against their winnings. As the federal government plans to reduce the gambling loss deduction to 90% for the 2026 tax year—a shift from the previous 100%—critics of SB595 argue that North Carolinians are being disproportionately affected for participating in the state’s regulated sports betting industry.
The Fairplaygov X account, focused on policy research regarding sports betting and prediction markets, described the bill as “outrageous.” They pointed out that “North Carolina bettors already cannot deduct losses from winnings on their state tax returns, and are limited to a 90% deduction for federal returns. This new stipulation allows the Secretary of State to request win/loss reports from mobile operators to verify accurate taxpayer reporting.”
“Many losing bettors typically don’t report their losses, leading to a general indifference toward these regulations. However, now the NC DOR will track if individuals were expected to report, initiating with last year,” Fairplaygov added.
Driving Bettors Offshore
Worsening the situation in the sports betting market, North Carolina’s lawmakers have raised the tax on sportsbooks from 18% to 23% in the recent budget, although the spending plan is not yet finalized. These increased operational expenses could result in higher costs for consumers, manifested through tighter odds and reduced promotions.
Should Governor Stein endorse SB595, a sports bettor who wins $2,000 but also loses $2,000 could find themselves liable for state tax on the entire $2,000 in “phantom income.” In this scenario, federally regulated sports prediction markets and offshore sportsbooks may present a more appealing option since they are not subject to state taxation or the constraints of SB595, potentially offering a safe haven from the growing legislative pressure in Raleigh.
The Sports Betting Alliance has called for an urgent reevaluation of the state’s stance on sports betting. “We urge state officials to focus on building a robust legal framework that safeguards players, fosters job creation, and eliminates illegal and unregulated operations in North Carolina,” stated the advocacy group dedicated to supporting legal, regulated online sports betting.