College students and teens can fuel prosperity

A version of this article first appeared in the CNBC Sport Newsletter with Alex Sherman, bringing you the biggest news and exclusive interviews from the world of sports business and media. subscription To receive future issues, directly to your inbox.

With trading volume booming in the market, Truist analysts say there may be an unexpected source behind the rise.

Analyst Barry Jonas wrote this week that 18- to 20-year-olds, who are too young to gamble legally in most states, could contribute significantly to the growth of prediction markets.

Specifically, data from HoldCrunch, founded by a former FanDuel executive, shows that prediction platform Kalshi makes more trades in college football than the NFL and NBA. While non-college students can still bet on college outcomes, of course, this trend can offer insight into the demographics of prediction platform users.

HoldCrunch analyzes data on the “handle equivalent OSB” rather than the volumes alone.

During the week ending Jan. 4, Calcio’s college football average reached the highest percentage of the total at 32%, the forecasting platform said. The NFL represents 24% of all bets, and the NBA represents 22%. According to Kalci, the tide has been turning in this direction since October.

Prediction markets – where users can bet on the outcome of events in everything from politics and world news to pop culture and sports – have skyrocketed in popularity with the help of platforms like Kalshi and Polymarket.

They are quickly filling a gap in the market in states where online sports betting is illegal. In states where it is legal, online sports betting is often limited to people 21 or older. Kalshi and Polymarket are open to anyone 18 years of age or older, with some state-by-state exceptions regarding sports and other specific professions.

“It is clear that these new offers are having an impact on sports bettors’ behavior,” Jonas wrote.

NCAA President Charlie Baker this week wrote to the Commodity and Futures Trading Commission, which regulates prediction markets, asking the agency to remove college sports from trading options until more safeguards are in place.

Juice Reel, an app that allows sports gamblers to track bets and provides analysis of betting and trading activity, found higher uptake of prediction markets in states where sports betting is not legal.

According to Juice Reel, 9% of its California customers have connected predictive accounts, the most of any state. Just over 6% of Juice Reel customers in Texas have associated predictive market accounts. Neither California nor Texas offers legal and licensed sports betting.

Curiously, New York, which has legal online sports betting, ranks second behind Juice Real in terms of customers with connected predictive accounts (6.8%), perhaps due to financial traders’ usual concentration on trading futures, options and other volatile financial derivatives. Truist analysts posit that 18- to 20-year-olds could fuel forecasting work in the state as well.

Residents of both New York and California show a marked tendency to gamble outside the confines of regulated sports betting. New York imposes a 51% tax on sports betting books, but not on sweeps, daily fantasy, bookmaker accounts and offshore sports betting books. These alternative platforms receive 40% of the total handle, or money wagered, from Juice Reel customers.

This is partly because gamblers who really know what they’re doing can’t bet big on platforms like DraftKings or FanDuel.

“Some of the biggest and best bettors are going to prediction markets because they are limited to small bets through sportsbooks,” Ricky Gould, founder of Juice Reel, told CNBC.

70% of the bets tracked by Juice Reel are on regulated sportsbooks, but they account for just 38% of handle. By contrast, predictions account for only 1% of the number of bets, but 13% of the handle.

“Prediction markets amplify bettor skill and variance,” Truist’s Jonas concluded, adding that they “exhibit much greater downside for low portfolio users and much higher upside for high portfolio users.”

Disclosure: There is a commercial relationship between CNBC and Kalshi.