Kalshi is stepping up consumer-protection measures for young traders on its prediction market by instituting a default monthly deposit limit of $2,500 for 18- to 20-year-olds.
"Like the stock exchange, Kalshi is available only to traders 18 and older," Kalshi co-founder and chief operating officer Luana Lopes Lara said in a press release. "Still, we know that young adults are often new to markets and may need more education and safeguards, so we are expanding our protections for this group of users."
The deposit limit will be put in place by default, but it isn't mandatory, according to a Kalshi spokesperson. Under-21s have the option to opt out of or increase or decrease their deposit limits. The spokesperson didn't clarify how Kalshi settled at $2,500 a month, or $30,000 a year, as the default deposit limit.
The default deposit limit adds to other protections in place for under-21s on Kalshi. "These users see a dedicated deposit flow that shows their monthly deposit totals and [profit and loss], followed by a mandatory cool-off period before the deposit goes through," the spokesperson told Barron's in a statement. "This isn't a one-time step: once a user's total monthly deposits reach $2,500, every deposit after that, even one as small as $1, triggers the same process. We'll also check in with this age group on a recurring basis until they turn 21."
Prediction markets have been criticized for offering financial contracts tied to sporting events that effectively enable nationwide sports betting for anyone over the age of 18. The model, pioneered by Kalshi, has been adopted by online sportsbooks like DraftKings and FanDuel, who previously couldn't offer sports betting in jurisdictions where it hadn't been legalized.
Youth participation in prediction markets has become a concern for lawmakers. A bill introduced in March by Sen. Richard Blumenthal (D-Conn.) and Sen. Andy Kim (D-N.J.) proposes prohibiting "an online prediction market from accepting wagers from any individual younger than 21 years of age."
According to Aldrin Research, 87% of Kalshi's trading volume for the week ending Oct. 24 was generated by trades on sports and combos -- known in the gambling industry as parlays -- where multiple positions are linked together for a large payout if each prediction proves correct.
In a question-and-answer session at the Economic Club of New York on Tuesday, Kalshi co-founder and chief executive Tarek Mansour called for more regulation on the issue of responsible trading. "The rules need to be updated to reflect the reality that financial markets now have millions of people -- not just institutions -- that participate in them."
In his remarks, Mansour said that under-21s represent a small portion of Kalshi's trading volume. He repeatedly drew a contrast between his business model and that of online sportsbooks, whose revenues are directly tied to customer losses; Kalshi, meanwhile, only takes a transaction fee for connecting two users on opposite sides of a trade.
"The key thing about prediction markets," Mansour said, "is when somebody is doing things that are harmful to them, they keep losing money and they're clearly vulnerable and have an addiction issue, they're not losing that money to Kalshi. They're losing it to somebody else who's on the market."
Isaac Rose-Berman, a fellow at the American Institute for Boys and Men focused on gambling policy, has taken issue with that position. He argues that for the vast majority of users, trading on a prediction market is no different than placing a bet at a sportsbook.
"They are risking money to try to win more money, and in the long run they are going to lose," Rose-Berman says. "Kalshi, just like a sportsbook, makes money because their users lose, they just split those losses with market makers, many of whom are institutional trading firms."
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