Democratic Senators Call for CFTC Ban on Wildfire Betting Markets

Senators Raise Safety and Profiteering Concerns

Nine Democratic senators have called on the Commodity Futures Trading Commission to establish regulations prohibiting prediction market contracts linked to wildfires. In correspondence addressed to CFTC Chair Michael Selig this week, the lawmakers—including Senator Jeff Merkley of Oregon, Senators Alex Padilla and Adam Schiff of California, and six additional Democratic colleagues—warned that allowing users to bet on wildfire outcomes poses significant public safety risks and creates perverse financial incentives that prioritize profit over community welfare.

The senators emphasized their concern that such contracts could encourage destructive behavior. They noted that offering financial rewards tied to specific wildfires creates conditions where individuals might be motivated to commit arson to ensure their bets succeed. Beyond direct incentives for fire-setting, the lawmakers highlighted the heightened risk of insider trading by those with access to non-public information about fire incidents, as well as the ethical concern of profiting from community suffering and natural disaster. In their letter, the senators noted that offering such bets “threatens to minimize communities’ suffering all so the rich and powerful can profit.”

Evidence of Real Wildfire Betting Activity

The senators pointed to concrete examples demonstrating that wildfire betting is already occurring in the marketplace. Polymarket, a leading prediction market platform, accepted more than $1.2 million in wagers tied to California’s devastating Palisades and Eaton fires in 2025, according to the senators’ letter. The lawmakers cited reports from state and local fire officials regarding the arson risk, lending credibility to their safety concerns. They warned that while these bets currently appear concentrated on the offshore Polymarket platform, the regulatory gap creates a window for additional U.S.-based designated contract markets to offer similar contracts before the next wildfire season begins.

The senators urged the CFTC to establish guardrails preventing such expansion before wildfire season intensifies. They emphasized the urgency of action, noting that regulators must close this loophole in both U.S. and offshore markets to prevent the normalization of disaster-betting contracts and protect public safety in fire-prone regions.

Growing Scrutiny of Prediction Markets

This regulatory push reflects mounting political and legal scrutiny surrounding prediction markets broadly. These platforms allow participants to purchase and sell contracts predicting the outcomes of various future events, ranging from cryptocurrency price movements to geopolitical developments. The sector has attracted increasing attention from institutional investors and traders, with investment bank Bernstein projecting that annual trading volume could reach $1 trillion by 2030. Platforms such as Myriad have contributed to the rapid expansion of prediction market adoption in recent years.

The letter comes as prediction markets face a complicated regulatory landscape, with lawmakers across the political spectrum examining their proper role in financial markets and society. The senators’ focus on wildfire betting underscores how specific use cases—particularly those that create perverse incentives or appear to profit from human suffering—may face targeted regulation even as the broader prediction market category continues to grow and attract mainstream adoption. Regulatory action on niche prediction market contracts could signal broader scrutiny across decentralized finance as the sector matures, potentially affecting how prediction market platforms operate in the future.

Source: U.S. Senate, via Decrypt. Not financial advice.