‘The ads got to me’: College-age adults are rushing to prediction market sites. Addiction experts are alarmed

Summary

• Young adults ages 18 to 21 can bet on prediction sites like Kalshi and Polymarket due to what critics call a legal “loophole.”
• These platforms are regulated as financial exchanges rather than gambling sites, avoiding state age restrictions.
• Companies like Kalshi say they have safeguards to protect vulnerable 18-to-21 users and follow all applicable laws.

AI-generated summary was reviewed by a CNN editor.

If you or someone you know may have a gambling problem, call the National Problem Gambling Helpline at 1-800-MY-RESET. To find a live Gamblers Anonymous meeting happening now, click here.

When Andrew needed money for a flight with friends to Greece this summer, the 18-year-old high school senior turned to prediction markets.

With a $500 cash advance from his credit card company, Andrew sat in a Starbucks for more than six hours, trading on live tennis matches on Kalshi. He left with a $2,200 profit.

Andrew continued using Kalshi to supplement wages from a part-time job, funding golf with friends and dates with his girlfriend. But after a scare where he nearly lost $1,000 on an NBA game, he deleted the app and swore he’d never return.

But he later re-downloaded Kalshi, and the cycle started again. He turned a $1,300 cash advance into $3,000, according to screenshots reviewed by CNN. When he tried to withdraw his winnings at 3 a.m., he got an error message. Unable to get his funds out, he decided to keep betting. And this time, within hours, it was all gone.

“I didn’t know what to do. I started spiraling,” Andrew, who asked that he not be identified by his full name, told CNN in an interview. “In the moment, you’re just going, going, going. It’s like tunnel vision.”

An 18-year-old like Andrew could place these wagers due to a legal technicality that treats prediction markets differently than traditional sportsbooks, which are 21+ in most states. Addiction experts and state regulators say this has opened the door to an emerging public health crisis.

Under current US law, prediction sites are not considered gambling. Rather, they’re financial markets that offer “event contracts,” which makes them available to anyone over 18. They are regulated just like futures trading over the price of soybeans – but instead of focusing on commodities, users speculate on the outcomes of elections, sporting events, awards shows and more.

Despite new steps prediction markets have recently taken to prevent problematic trading, including among the 18-to-21 cohort, there are still widespread concerns from state regulators, members of Congress and addiction specialists.

“Without question, it’s a loophole,” said former New Jersey Attorney General Matt Platkin, a Democrat, who was one of the first prosecutors to take legal action against Kalshi last year. “This is why states put common-sense age restrictions on gambling, drinking and other forms of dangerous behavior.”

CNN has a partnership with Kalshi and uses its data to cover major events, but editorial employees are prohibited from using prediction markets.

In response to questions from CNN about Andrew’s experience, Kalshi spokeswoman Elisabeth Diana said Andrew saw an error message while trying to withdraw his winnings because his bank issued a fraud alert.

“Kalshi’s withdrawal system did not fail,” Diana said in a statement. “As a regulated financial exchange, we have to work with similarly regulated banks … that means that when a bank issues a fraud alert, we have to hold the transaction until we get an OK to move ahead.”

Through the course of Andrew’s up-and-down trading, Andrew’s net lifetime losses ended up around $800, which Diana said was low enough that it didn’t trigger notifications suggesting deposit limits. But she said Kalshi will “continue evaluating our approach to ensure people get the appropriate protections and support they need.”

“The law allows people 18 years old and above to trade on financial products, whether it’s crypto, options, day trading, futures, or prediction markets.” Diana added.

Polymarket, the largest company rivaling Kalshi, declined to comment when asked about its safeguards for young users.

Health experts say the part of the brain responsible for impulse control isn’t fully developed until age 25, and research indicates that young people are more susceptible to developing gambling addictions.

Philip Sullivan, who runs the Florida Council on Compulsive Gambling’s helpline, said many under-21 prediction site users who reached out for help had relapsed from addictions to other betting platforms.

“They are not only wagering on sports outcomes, but also placing wagers based on things they hear in the news or online, because they believe it gives them some type of advantage or insight,” Sullivan said. “It’s a concerning gap between emotional and financial maturity, and the level of gambling accessibility these platforms provide.”

Compounding the risk, many college-age adults gain access to larger sums of money through student loans, effectively expanding the pool of funds they can use for gambling.

That was the case for a 21-year-old college student who lost “over five figures” on Kalshi and Polymarket, according to Abdullah Mahmood, who runs the gaming intervention program at the Maryhaven rehab center in Columbus, Ohio.

While prediction companies push back against arguments that they’re essentially gambling platforms, many addiction experts say they fit the criteria. And unlike drug addictions, problem gambling can more easily go undetected by friends and family members. The impact it has on individuals, especially young adults, is known to drive people to suicide in extreme cases.

That’s why Mahmood begins his intake sessions with the same message: “No matter how much money you lost, you didn’t lose your life yet. And that’s the most valuable asset.”

Because prediction sites aren’t legally classified as gambling under current law, they register as financial exchanges with a little-known federal agency called the Commodity Futures Trading Commission, or CFTC.

The Trump-era CFTC under chair Mike Selig has argued that prediction sites aren’t gambling because they serve the public interest and can be used to offset financial risks through hedging – like a farmer who uses futures or options to protect against swings in crop prices or poor harvests.

In a social media post Tuesday, Trump said it was “critically important” for the CFTC to maintain its exclusive jurisdiction over prediction markets, and bashed Democrats who want more state regulations. He also praised Selig for “doing a great job” and said he wants the industry to “thrive.”

A bipartisan coalition of 41 states and the District of Columbia have argued in court that prediction markets are brazenly skirting state gaming laws. States are cracking down, and Minnesota recently became the first state to ban prediction markets, but the CFTC filed a lawsuit to block that law.

The legal status of prediction markets is being debated in dozens of court cases across the country, and experts now believe the Supreme Court will eventually settle the question.

“It is concerning that there’s a degree of addiction associated with participation in various financial markets,” Selig told CNN in a recent interview. “It’s very important for firms that offer access to these products, whether they’re in a casino or in a financial market, to provide risk disclosure voluntarily and educational materials – and don’t take this lightly.”

In a letter to the CFTC, the Pennsylvania Gaming Control Board said the agency has “actively endangered a highly vulnerable demographic of young adults” between 18 and 21 by letting prediction platforms like Kalshi “masquerade as unregulated sportsbooks.”

The CFTC is currently writing new regulations for prediction markets, which experts believe will be industry-friendly, given Selig’s public support for the companies. The agency solicited comments from stakeholders and the public in March, before the rulemaking process began.

The NBA and PGA Tour urged the agency to raise the minimum age to 21 for sports-related event contracts. The NBA also said prediction sites should be prohibited from marketing to anyone under 21, because younger traders have “particularly acute” vulnerabilities.

An 18-year-old student named Caleb submitted a comment to the CFTC saying prediction sites were “fun” and provided “useful” insights – but were still too risky for people his age.

“Predictions absolutely mean gambling, and frankly, I’m surprised you loopholed this so well to allow someone like ME to gamble on this stuff,” Caleb wrote. “100% should be banned before more kids like me use it, because God knows they shouldn’t.”

Some companies have sought to get ahead of forthcoming regulation by taking voluntary steps to protect younger users.

Kalshi recently became the first prediction site to join the National Council on Problem Gambling, which supports raising the age for these platforms to 21. Kalshi said it was giving the council $2 million for a “strategic initiative focused on trader health and safety” for prediction markets, cryptocurrency and commodity futures.

Kalshi also announced this month that it was imposing new rules, including some that were floated in a recent Senate proposal, to promote responsible behaviors for users ages 18 to 21.

Users with “signs of unhealthy trading,” like rapid financial losses, will be encouraged to set deposit limits and, in some cases, will need to provide proof of funds before they can continue trading.

The company wouldn’t tell CNN how many users are in the 18-21 age group, but a Kalshi spokesperson said that cohort is only responsible for 4% of all trading volume on the site. Kalshi averaged around $4 billion in weekly spot volume last month, according to Artemis Analytics, a financial data firm.

Catherine Sullivan, Kalshi’s head of product, told CNN these policies are “suggestions and gentle guardrails” to protect “new adults” on the platform.

“They’re technically adults,” Sullivan said. “They have the freedom to use any tool they want. But, of course, a lot of people in America think of them as young adults, or not having the right frame-of-mind to make decisions.”

However, she added, “Who are we to really police what people can do once they turn 18? These are the principles with which the country was founded.”

An industry source familiar with the matter told CNN that executives from major prediction companies recently discussed jointly encouraging the CFTC to raise the minimum age from 18 to 21. However, this idea was shelved due to lack of unanimity.

At least one company, Fanatics, has already taken that step. The sports merchandising giant launched a 21+ prediction platform in December, mirroring the rules for its in-person sportsbooks and betting apps.

“For us, it’s the right thing to do,” Fanatics spokesman Kevin Hennessy said. “We believe 21+ is the right age for any type of real-money activities. And it’s great from a technology standpoint. We can keep our customers 21+ through all of our products.”

Advocacy groups have also raised concerns about prediction companies targeting younger users with slick social media marketing campaigns. There are few, if any, restrictions on how prediction sites advertise because of how they’re currently regulated under federal law.

Andrew, the 18-year-old Kalshi user, said he saw ads for prediction sites that minimized “the severity of what you’re doing.”

“I was sad, and the ads got to me,” he said.

A recent Polymarket ad featured dramatic footage of influencer Logan Paul skydiving and urging followers to download the app, which became widely available for US users this month after securing CFTC approval last year. Kalshi’s ads – including some it has since distanced itself from – have featured youthful content creators promoting its platform as a “money hack” and a “side-hustle” where people can easily earn extra income.

And, for a time, that’s exactly what Andrew did.

He had limited financial support from his parents and had a part-time job that barely covered expenses. Trading on Kalshi felt like a “respectable job” and made him “feel productive,” he said, while also getting “a rush of dopamine” from winning.

He developed a “gambler’s mindset” while using Kalshi, where “it seemed that whatever I lost, I could just win back.”

But soon he couldn’t enjoy sports on TV without betting, saying he was always “associating sports with money instead of just watching the game and enjoying the beauty of it.” Over time, betting started overtaking his daily activities.

“I would go to class, and I would just be sitting there looking at these tennis matches I bet on,” Andrew said. “And I’d be bragging to my friends, saying, ‘Oh, look, I just made 200 bucks. You guys are just sitting here learning.’”

After losing everything, he called the national gambling hotline.

“They gave me some resources, but a lot of the stuff they were suggesting was, like, paid therapists,” Andrew said of his call to the hotline. “And I’m like, ‘Well, I’m $2,000 in debt. I don’t want to pay for a therapist.”

State gaming laws have far more robust consumer protections than federal commodity-trading laws.

States restrict casinos from targeting their advertising toward younger people. They require casinos to fund anti-addiction programs. And licensed sportsbooks and casinos must cooperate with states on self-exclusion lists, where people can ask that they be blocked from physically entering casinos or signing up for online gaming apps.

“The general rule is, if you’re doing something risky, you must be 21,” gaming industry lawyer Dennis Ehling said. “Most states are 21+ for gambling, and there has been no real debate over whether to override the views of states.”

This is why some lawmakers are ready for Congress to rein in the industry.

Lawmakers have introduced more than a dozen bills this year, including one proposal to raise the minimum age to 21. The bipartisan concerns were on full display at a Senate hearing Wednesday about sports-betting.

“Our state regulators and our state attorneys general have a role to play,” said GOP Sen. Marsha Blackburn, who criticized the lack of “comprehensive coverage at the federal level” to protect youths.

Democratic Sen. Maria Cantwell said prediction sites were “acting under color of federal law, targeting people as young as 18.”

“The harm is growing exponentially,” she added.