U.S. Senators Demand CFTC Crackdown on Wildfire Betting Amid Arson Fears

A group of nine Democratic U.S. senators has formally asked the Commodity Futures Trading Commission (CFTC) to crack down on prediction market platforms offering event contracts tied to wildfires, warning that the practice could create a dangerous financial incentive for arson. The letter, sent to CFTC Chair Michael Selig, comes as another destructive wildfire season burns across the western United States.

Senator Martin Heinrich (D-N.M.), Ranking Member of the Senate Energy and Natural Resources Committee, led the letter alongside Senators Jeff Merkley (D-Ore.), Alex Padilla (D-Calif.), Jeanne Shaheen (D-N.H.), Adam Schiff (D-Calif.), Jacky Rosen (D-Nev.), Catherine Cortez Masto (D-Nev.), Ron Wyden (D-Ore.) and Amy Klobuchar (D-Minn.). The senators gave the CFTC until August 14 to answer a list of questions about the agency’s plans, or lack thereof, to regulate wildfire-related event contracts.

The Case Against Wildfire Contracts

The senators’ letter points directly to Polymarket, describing how the platform accepted more than $1.2 million in bets tied to the January 2025 Palisades and Eaton fires in Los Angeles, a pair of blazes that killed 31 people and destroyed more than 16,000 structures. Traders on the platform wagered on questions like how many acres the fires would burn and when they would be contained. The letter also references the launch of a separate platform built solely around simulated wildfire wagers, with a slogan the senators quoted directly: “You can’t predict fire, but you can trade on it.”

“Offering bets on destructive wildfires threatens to minimize communities’ suffering all so the rich and powerful can profit,” the senators wrote. They argued the structure of these contracts raises a distinct risk beyond ordinary prediction markets on elections or economic data. “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 letter states, adding that the contracts could also motivate someone to keep an existing fire burning rather than see it contained.

A Split Between the Two Biggest Platforms

The letter highlights a notable divide in how the industry’s two largest platforms have handled the issue. Kalshi has taken a firm stance against wildfire markets. A company spokesperson told Ars Technica that Kalshi does not allow such contracts “because they create perverse incentives,” and Kalshi does not currently list wildfire-specific event contracts on its CFTC-regulated exchange.

Polymarket, which operates offshore and outside direct CFTC oversight, has defended its past wildfire markets by arguing it doesn’t “profit from outcomes” and that removing the contracts “does not prevent a tragedy but makes the most accurate information less accessible to the people who need it most.” The company has said it currently has no active wildfire markets and hasn’t for some time, though the senators note that could change given the platform’s rapid growth and history of testing new event categories during active disasters.

Matthew Hurteau, a professor of biology at the University of New Mexico who studies wildfire behavior, was blunt about the distinction between wildfire contracts and other prediction markets. “One person making a bet doesn’t change the direction of a company’s stock or the price of a commodity,” Hurteau said, arguing that wildfire wagers are different in kind. “Whereas in the case of betting on wildfires, one person could place a bet and then go light the wildfire, and I think that it should be banned.”

Regulatory Pressure Building From Multiple Directions

The senators’ letter lands amid a broader wave of scrutiny facing prediction markets across the country. New York recently filed a lawsuit against Kalshi accusing the company of running an illegal gambling operation, while Kentucky has sued both Kalshi and Polymarket over allegations tied to sports-related contracts. Minnesota attempted to ban prediction markets outright before facing its own federal lawsuit from the industry, and a federal judge in Michigan ruled that certain sports contracts fall outside the CFTC’s jurisdiction — a decision that has muddied exactly which agency, if any, has clear authority over specific categories of event contracts, including wildfires.

In their letter, the senators specifically asked whether the CFTC is considering prohibiting designated contract markets from offering wildfire event contracts as part of its ongoing rulemaking, and whether the agency has any enforcement plans for offshore platforms like Polymarket that operate outside standard U.S. oversight. They also asked the CFTC directly whether it believes contracts wagering on how long a wildfire lasts, how much destruction it causes, or how large it grows are in the public interest.

Whether the CFTC responds by the senators’ August 14 deadline — and what, if any, action follows — remains to be seen. For now, the episode underscores how quickly prediction markets have expanded into categories that regulators, and even some of the platforms themselves, are still working out how to handle. Bettors tracking how oversight of platforms like Kalshi and Polymarket continues to evolve should expect more regulatory back-and-forth in the months ahead, particularly as wildfire season stretches on and lawmakers keep pressing for guardrails on what event contracts can and can’t cover.