US senators are pushing the CFTC to ban wildfire event contracts on prediction markets, citing risks of arson, insider trading, and disaster profiteering.
DeFi & Yields ·
Nine Democratic senators have called on the Commodity Futures Trading Commission to prohibit prediction market contracts linked to wildfires, warning that such instruments create perverse incentives. Led by Sen. Jeff Merkley of Oregon and Sen. Alex Padilla of California, the group cited concerns that wildfire betting could encourage arson, facilitate insider trading, and allow profit-taking from disasters. The senators pointed to over $1.2 million in wagers placed on California's Palisades and Eaton fires in 2025 through Polymarket and flagged the emergence of additional platforms enabling such speculation.
The letter to CFTC Chair Michael Selig frames wildfire contracts as a public safety risk, noting that fire officials have flagged the possibility that bettors could be motivated to commit arson to ensure their positions succeed. Lawmakers also warned that prediction markets could encourage interference with active fires and create openings for insider advantage. They urged the agency to establish guardrails before the next wildfire season, emphasizing that while current bets appear concentrated on offshore platforms, U.S.-based regulated markets may soon offer similar contracts.
The push arrives amid broader regulatory uncertainty surrounding prediction markets. Recent developments include a federal court ruling that sports prediction markets fall outside CFTC jurisdiction, a state-level ban in Minnesota followed by federal litigation, and a lawsuit by Kentucky against operators Kalshi and Polymarket. The industry itself continues expanding, with projections suggesting annual trading could reach $1 trillion by 2030.