A version of this article first appeared in the CNBC Sports Newsletter with Alex Sherman. This newsletter brings you the biggest news and exclusive interviews from the world of sports business and media. Sign up to receive future editions directly to your inbox.
As prediction market trading volume soars, Trust analysts say there may be a surprising reason behind the surge.
Analyst Barry Jonas wrote this week that 18- to 20-year-olds, who are too young to gamble legally in most states, could be a big contributor to prediction market growth.
Specifically, data from HoldCrunch, founded by a former FanDuel executive, shows that prediction platform Kalshi makes more trades in college football than the NFL or NBA. Of course, non-university students may also bet on university performance, but this trend could provide insight into the user base of prediction platforms.
HoldCrunch analyzes data for “OSB equivalent handles” rather than volumes alone.
For the week ending Jan. 4, Carsi’s college football handle reached its highest percentage overall at 32%, according to the prediction platform. The NFL accounted for 24% of total bets, while the NBA accounted for 22%. The tide has been turning in that direction since October, Kalsi said.
Prediction markets, which allow users to bet on the outcome of everything from politics and world news to pop culture and sports, are soaring in popularity thanks to platforms like Kalshi and Polymarket.
They are quickly filling a gap in the market in states where online sports betting is not legal. Additionally, in states where it is legal, online sports betting is often restricted to people over 21 years of age. Karshi and Polymarket are open to anyone over the age of 18, with state-by-state exceptions for sports and certain other transactions.
“It is clear that these new services are having an impact on sports bettor behavior,” Jonas wrote.
NCAA President Charlie Baker sent a letter this week to the Commodity Futures Trading Commission, which regulates prediction markets, asking the agency to remove college sports from trading options until more safeguards are put in place.
Juice Reel, an app that helps sports gamblers track their bets and provide analysis of their wagering and trading activity, has found that prediction market usage is higher in states where sports betting is not legal.
According to Juice Reel, 9% of its customers in California are connected to a prediction account, the most of any state. Just over 6% of Juice Reel’s Texas customers have linked prediction market accounts. Neither California nor Texas offer legal and licensed sports betting.
Curiously, New York state, where online sports betting is legal, ranks second on Juice Reel in the number of customers connected to a betting account (6.8%), likely due to its high concentration of financial traders accustomed to trading futures, options, and other volatile financial derivatives. Trust analysts hypothesize that 18- to 20-year-olds may also be driving forecasting activity in the state.
Residents of both New York and California have shown a marked tendency to gamble outside of regulated sportsbooks. New York State imposes a 51% tax on sportsbooks, but not on sweeps, daily fantasy, bookmakers, or offshore sportsbooks. And those alternative platforms earn 40% of the entire handle, or stake, from Juice Reel customers.
Part of the reason is that gamblers who really know what they’re doing can’t bet big bucks on platforms like DraftKings or FanDuel.
Juice Reel founder Ricky Gold told CNBC that “some of the biggest and best bettors are moving into the prediction market because they are restricted to small bets by sportsbooks.”
70% of the bets Juice Reel tracks are placed at regulated sportsbooks, but only 38% of the handle amount. In contrast, predictions account for only 1% of bets but 13% of handles.
“Prediction markets amplify the skill and dispersion of bettors,” concluded Trust’s Jonas, adding, “There is a fairly large downside for low wallet users and a fairly large upside for high wallet users.”
Disclosure: CNBC and Kalsi have a commercial relationship.
