LOS ANGELES, CA – California lawmakers are calling for federal regulators to crack down on prediction markets that allow people to wager money on wildfires, warning that contracts tied to the spread, duration and destruction caused by fires could create dangerous incentives while allowing traders to profit from disasters devastating entire communities.
U.S. Sens. Adam Schiff and Alex Padilla of California joined seven other senators in an Aug. 3 letter urging the Commodity Futures Trading Commission to examine wildfire-related event contracts and consider restrictions on their availability.
The nine senators who signed the letter were Schiff, Padilla, Jeff Merkley of Oregon, Jeanne Shaheen of New Hampshire, Jacky Rosen and Catherine Cortez Masto of Nevada, Martin Heinrich of New Mexico, Ron Wyden of Oregon and Amy Klobuchar of Minnesota.
Their concern centers on prediction markets that allow participants to buy and sell contracts based on the outcome of future events.
The CFTC explains that event contracts can be structured as financial derivatives whose value depends on whether a particular event occurs or on some measurable outcome connected to that event. They can be used either to manage risk or to speculate on what will happen.
Wildfires, lawmakers argue, present a particularly troubling application of that model because human behavior can potentially influence both the start of a fire and what happens after it begins.
“Offering bets on destructive wildfires threatens to minimize communities’ suffering all so the rich and powerful can profit,” the senators wrote in their letter to CFTC Chairman Michael Selig.
The lawmakers also raised a more direct public-safety concern: the possibility that someone with money riding on a particular outcome could attempt to influence a wildfire.
“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 senators wrote. They also warned that contracts involving active fires could raise concerns about attempts to influence an existing incident and about insider information being used for financial gain.
For communities that have experienced catastrophic fires firsthand, the concept has drawn a sharply negative reaction.
Wrightwood residents are among those familiar with the consequences of a major wildfire after the 2024 Bridge Fire swept through the region.
“Wrightwood is a community where everybody comes together,” longtime resident Leslie Mihalko said.
The Bridge Fire ultimately burned 56,030 acres and destroyed 81 structures, according to CAL FIRE. Another 17 structures were damaged, and eight firefighters were injured.
Many residents were forced to evacuate as the fire threatened mountain communities.
“I know people that have suffered great losses,” resident Terry Brice said.
For residents who have watched neighbors lose homes and property, the idea that someone elsewhere could financially benefit from the size or duration of a wildfire has raised difficult ethical questions.
“Don’t people have better things to do than bet on things that could potentially affect the rest of a person’s life?” Mihalko said.
The senators pointed specifically to activity surrounding the catastrophic Los Angeles County fires of January 2025.
According to their letter, more than $1.2 million in wagers were accepted by Polymarket on contracts connected to the Palisades and Eaton fires.
Those two fires caused extraordinary destruction.
The Eaton Fire destroyed 9,419 structures, damaged another 1,076 and resulted in 19 confirmed civilian fatalities, according to CAL FIRE.
The Palisades Fire destroyed 6,845 structures and damaged 975 more. CAL FIRE lists 12 confirmed civilian fatalities from that fire.
Combined, the fires killed 31 people and destroyed more than 16,000 structures, figures also cited by the senators in their letter to the CFTC.
The concern is not simply that people were wagering on whether a wildfire would occur.
The contracts highlighted by lawmakers involved questions about the behavior and consequences of active fires — including how long a fire might continue, how much acreage it might consume and how much destruction it could cause.
One of the wagers described in the information reviewed by Street People involved whether the Palisades Fire would reach 10,000 acres by a particular date.
That distinction is central to lawmakers’ argument.
Unlike a prediction about an election result or an economic statistic, they contend that certain wildfire outcomes can theoretically be affected by deliberate human conduct.
The senators warned that a person with a financial interest in a fire growing larger or lasting longer could face what they described as a “perverse incentive” to interfere with the outcome.
Their letter does not allege that any person actually committed arson in order to win a wildfire wager.
Instead, lawmakers are asking regulators to address the risk before such markets expand further.
The issue arrives as the CFTC itself is already reconsidering how prediction markets should be regulated.
In March, the commission opened an Advance Notice of Proposed Rulemaking on prediction markets, seeking public input on event contracts, their regulation and the circumstances under which particular types of contracts could be considered contrary to the public interest.
The commission noted that the number and variety of event contracts available through prediction markets have increased significantly since 2021.
Federal commodities law already gives the CFTC authority to examine certain event-contract categories and determine whether they conflict with the public interest.
The commission’s current review explicitly asks how it should approach contracts involving subjects such as terrorism, assassination, war and gaming, as well as other potentially similar activities.
Wildfires are not specifically listed among those established categories.
That gap is one reason the senators are pressing the agency to address natural disasters as part of its broader regulatory review.
The lawmakers asked whether the CFTC is considering prohibiting U.S.-regulated exchanges from listing wildfire contracts, whether the agency has plans to address similar contracts offered offshore and whether contracts based on wildfire duration, destruction or growth should be considered in the public interest.
They also asked whether the commission intends to issue enforcement guidance concerning wildfire-related event contracts.
The senators gave the agency an Aug. 14 deadline to respond to their questions.
Polymarket, meanwhile, has defended the broader concept of prediction markets.
In a statement provided in connection with the controversy, the company said its markets operate on a peer-to-peer basis and that it does not set betting lines, take the opposite side of trades or profit based on which outcome ultimately occurs.
The company also argued that prediction markets can serve as a source of information during rapidly developing events and said eliminating those markets would not prevent disasters from occurring.
Polymarket said wildfire-related contracts have not been offered on its domestic platform since January 2025.
Lawmakers remain concerned that products appearing offshore could eventually reach U.S.-regulated prediction markets if federal regulators do not establish clearer boundaries.
“While these bets appear to be offered only on the offshore Polymarket site, it is only a matter of time before other U.S. based Designated Contract Markets try to offer these,” the senators wrote. “The CFTC must lead the charge to rein in these contracts in the U.S. and offshore.”
The debate therefore extends beyond whether betting on disasters is distasteful.
At its core is a regulatory question over whether wildfire prediction contracts should be treated like other speculative financial products or whether the potential for manipulation, arson, insider activity and community harm makes them fundamentally different.
For residents in wildfire-prone communities such as Wrightwood and across Southern California, that policy debate is tied to something much more tangible.
A wager on acreage burned can correspond to neighborhoods evacuated, structures destroyed and families permanently displaced.
California’s senators and their colleagues are now asking federal regulators to decide whether those outcomes should be tradable at all.
The CFTC’s broader prediction-market rulemaking remains under consideration, and the senators are seeking specific action to prevent wildfire event contracts from becoming a larger part of the U.S. prediction-market industry.
