Senators want the CFTC to shut down wildfire betting that mostly isn't happening

A letter led by Jeff Merkley warns markets could reward arson. No arson has been linked to one, and the major US platforms don't list the contracts.

A group of Democratic senators, led by Jeff Merkley of Oregon, wrote to the Commodity Futures Trading Commission on August 3 asking it to rein in prediction-market trading on wildfires. The stated concern is that a financial payout tied to acreage burned or containment time could eventually give somebody a reason to start a fire.

The concern is currently theoretical. No arson has been linked to any prediction market. Kalshi does not list wildfire contracts and prohibits them on the grounds that they create perverse incentives; Polymarket's US-facing operation does not list them either, though its users can trade on earthquakes, hurricanes and volcanic eruptions. The one concrete figure in the reporting is that offshore platforms took more than $1.2 million in wagers on fire-related outcomes during the January 2025 Los Angeles fires.

We card this as friction with a light hand. Prediction markets are, at their best, an information technology — a way of pricing uncertainty about disasters that insurers and planners currently guess at, which is squarely a SECURITY concern under risk pooling and disaster resilience. Pre-emptive restriction of a market that the major venues have already declined to offer is a cost without a corresponding harm on the record.

The material here is a letter. There is no rule, no proceeding and no CFTC response yet, which is why this sits at the bottom of the day's weighting.

Source: Ars Technica