As prediction markets experience a surge in trading volume, analysts at Truist suggest a surprising demographic may be contributing significantly: 18- to 20-year-olds who are too young to gamble legally in most states.

Data analyzed by HoldCrunch indicates that on the prediction platform Kalshi, college football now commands a larger share of trading handle than the NFL or NBA. For the week ending January 4, college football accounted for 32% of total wagers on Kalshi, compared to 24% for the NFL and 22% for the NBA. While non-students also wager on college outcomes, the trend offers a clue about user demographics, as platforms like Kalshi and Polymarket are open to users aged 18 and older, unlike many state-regulated sportsbooks which have a minimum age of 21.

"These new offerings are having an impact on sports bettor behavior," wrote Truist analyst Barry Jonas. The platforms are filling a gap in states where online sports betting remains illegal and attracting younger users where it is legal.

The growth has drawn regulatory scrutiny. NCAA President Charlie Baker has asked the Commodities and Futures Trading Commission (CFTC), which regulates these markets, to prohibit trading on college sports until stronger safeguards are implemented.

Further data from the betting analytics app Juice Reel shows higher adoption of prediction markets in states without legal sports betting. California leads with 9% of its users connected to prediction accounts, followed by New York at 6.8%. New York's high rate is notable given its legal sports betting market, potentially driven by a concentration of financial traders or, as Truist hypothesizes, underage participants.

The appeal of prediction markets extends beyond accessibility. They attract sophisticated betters who face strict betting limits on traditional sportsbooks. "Some of the biggest and best bettors are going to prediction markets because they’re limited to smaller bets by the sportsbooks," said Juice Reel founder Ricky Gold.

This shift is altering betting economics. While regulated sportsbooks account for 70% of the number of bets tracked by Juice Reel, they represent only 38% of the total money wagered (handle). In contrast, prediction markets make up just 1% of the number of bets but a substantial 13% of the handle.

Jonas concluded that prediction markets amplify bettor skill and variance, creating "substantially larger downside for low-wallet users and substantially higher upside for high-wallet users."