Sorry, yes... it's deadly.
You should sterilize your seedling soil in the oven at 400 degrees for about 30-60 minutes in a lasagne pan if you have ANY doubts as to whether it is safe to use. Generally the stuff from the garden store that is meant for seedlings is okay.
Also, try watering by standing them in a tray of water and letting them absorb it that way- let the pots suck up the water, then take them out. This leaves the surface dry and the lower part that matters wet.