By Marshall Cohen, Elisabeth Buchwald, CNN
(CNN) — 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.”
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