U.S. Senators Call for Crackdown on Wildfire Prediction Markets Amid Arson Fears

A group of nine Democratic senators has sent a letter to the Commodity Futures Trading Commission demanding a crackdown on prediction market platforms that let users bet on wildfires, warning the practice could incentivize arson. The letter, addressed to CFTC Chair Michael Selig and sent Monday, argues that offering event contracts tied to active wildfires risks turning natural disasters into profit opportunities for “the rich and powerful” while putting fire-stricken communities at greater risk.

The letter was signed by Senators Jeff Merkley and Ron Wyden of Oregon, Adam Schiff and Alex Padilla of California, Jeanne Shaheen of New Hampshire, Jacky Rosen and Catherine Cortez Masto of Nevada, Martin Heinrich of New Mexico, and Amy Klobuchar of Minnesota. It comes as wildfires continue to burn across parts of the Pacific Northwest during what the senators describe as another record-breaking fire season.

Why Lawmakers Are Worried About Wildfire Contracts

The senators’ central concern is that wagering on how long a wildfire burns, how many acres it destroys, or when it gets contained could create what they call “perverse incentives” for bad actors. “There’s also the heightened risk — according to state and local fire officials — that individuals could be tempted to commit arson in order to make sure their bets are successful,” the lawmakers wrote. They further argued that active bettors could be motivated to keep an already-burning fire going longer than it otherwise would, raising both public safety and insider trading concerns.

The letter specifically cites reports that Polymarket, described as the largest prediction market platform in the world, accepted more than $1.2 million in wagers tied to the Palisades and Eaton fires that tore through Southern California in January 2025. Those fires killed 31 people and destroyed more than 16,000 structures. The senators also referenced a separate platform that markets itself specifically around simulated wildfire bets in California, with a slogan boasting that “you can’t predict fire, but you can trade on it.”

CFTC Faces an August 14 Deadline

The senators asked Selig to answer a series of questions by August 14, including whether the CFTC is considering banning designated contract markets from listing wildfire-related event contracts, whether the agency has any enforcement plans for offshore platforms offering similar bets, and whether the CFTC views contracts tied to a fire’s duration, size, or growth as being in the public interest.

“As the United States faces yet another record-breaking fire season this year, the Commodity Futures Trading Commission cannot allow these prediction markets to offer unrestricted betting on wildfires,” the senators wrote, adding that while the wildfire contracts currently appear limited mostly to the offshore Polymarket platform, “it is only a matter of time before other U.S.-based designated contract markets try to offer these.”

How Kalshi and Polymarket Are Responding

Kalshi, one of the two dominant prediction market operators alongside Polymarket, told reporters it does not currently offer wildfire markets specifically because they create the kind of perverse incentives the senators described. A company spokesperson said Kalshi made that call deliberately, distancing itself from the practice even as its rival draws scrutiny.

Polymarket, for its part, defended keeping the markets open. A company statement argued that pulling the contracts “does not prevent a tragedy” and instead “makes the most accurate information less accessible to those seeking to understand what may happen next.” The company has framed its wildfire and disaster-related markets as a real-time information tool rather than pure speculation, a position that has become part of the broader industry argument for why event contracts on catastrophic events should remain available to traders.

The wildfire letter lands amid a wider regulatory battle over how prediction markets should be treated. Both Kalshi and Polymarket have leaned on federal court wins arguing their event contracts are financial derivatives that fall under exclusive CFTC jurisdiction, a legal theory that has let them sidestep state-level gambling regulation in numerous jurisdictions. New York Attorney General Letitia James filed suit against Kalshi just days before the senators’ letter went out, arguing the platform is running “an illegal gambling operation” in the state.

What Comes Next

The CFTC has not yet responded publicly to the senators’ letter, and it remains unclear whether the commission will pursue new rulemaking specifically targeting wildfire or disaster-related event contracts. With the response deadline set for August 14, the coming weeks should clarify whether federal regulators plan to draw a hard line around betting on natural disasters, or whether the current patchwork — where one major platform voluntarily avoids the practice while another defends it — continues into the fall fire season.