Senators Urge Regulator to 'Crack Down on Prediction Markets' Amid Wildfire Betting

As wildfires ravaged large swaths of the Western US, a group of Democratic senators on Monday called on federal regulators to rein in prediction markets offering contracts tied to such disasters, warning that turning climate-fueled extreme weather into financial wagers creates "perverse incentives" that could motivate arson and other crimes.

In a letter to Commodity Futures Trading Commission (CFTC) Chair Michael Selig, Sens. Jeff Merkley (Ore.), Alex Padilla (Calif.), Jeanne Shaheen (NH), Adam Schiff (Calif.), Jacky Rosen (Nevada), Catherine Cortez Masto (Nevada), Martin Heinrich (NM), Ron Wyden (Ore.), and Amy Klobuchar (Minn.) wrote that "prediction markets have been enabled to expand rapidly, increasingly inviting speculation on war, political violence, disasters, and public emergencies that raise ethical and public policy concerns."

"These markets risk creating perverse incentives, undermining public trust, and commodifying human suffering in ways that warrant careful scrutiny," the lawmakers continued. "Recent public reports have highlighted how Polymarket—the largest prediction market platform in the world—accepted more than $1.2 million in bets surrounding the Palisades and Eaton fires in January 2025. These fires devastated the Los Angeles area, claiming the lives of 31 people and destroying more than 16,000 structures."

"Offering bets on destructive wildfires threatens to minimize communities’ suffering all so the rich and powerful can profit," the letter argues. "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."

"By offering contracts on fires, prediction market sites run the risk of encouraging people to influence fires that have already started, creating additional concerns around public safety and insider trading," the senators added.

The CFTC controversially considers Polymarket and Kalshi designated contract markets (DCMs)—over which the federal agency has control versus state gambling regimes—and is currently developing nationwide rules.

The letter's signers asked Selig:

• Is the CFTC considering prohibiting DCMs from offering event contracts on wildfires as part of the rulemaking process currently underway, given they are against the public’s interest?
• Does the CFTC have any plans to curb bets on wildfires on prediction markets in the United States?
• Does the agency have plans to address these contracts being offered on offshore markets?
• Does the CFTC believe event contracts offered on the following wildfire-related events are in the public interest?
• Does the commission have guidance or planned enforcement related to these wildfire event contracts?

"As the United States faces yet another record-breaking fire season this year, the [CFTC] cannot allow these prediction markets to offer unrestricted betting on wildfires," the senators stressed. "While these bets appear to be offered only on the offshore Polymarket site, it is only a matter of time before other US-based designated contract markets try to offer these. The CFTC must lead the charge to rein in these contracts in the US and offshore and put in place commonsense guardrails to prevent people from profiting as wildfires threaten communities."

In addition to wildfires, Polymarket users can place wagers related to earthquakes, hurricanes, and volcanic eruptions.

Polymarket responded to the senators' letter in a statement to Claims Journal saying, "When tragedy unfolds, people turn to the news for commentary and to Polymarket for information.”

"While we recognize the risks associated with these markets, removing them does not prevent a tragedy," the company added. "It only makes timely, market-based information less accessible to those seeking to understand what may happen next.”

The senators' letter came days after Democratic New York Attorney General Letitia James announced a lawsuit targeting Polymarket competitor Kalshi for operating as “an illegal gambling operation" in "flagrant disregard” for the Empire State’s “Constitution, penal laws, and other statutes.”

Last month, a coalition of consumer advocacy groups condemned the CFTC's attempt to allow platforms like Kalshi and Polymarket “a green light to bypass state gambling regimes.”

“Calling a sports wager an ‘event contract’ does not transform it into a legitimate tool for managing economic risk,” said Eric Naing, communications director for Demand Progress Education Fund, one of the groups decrying the regulator's approach to such companies.