Nine Democratic senators are pressing the Commodity Futures Trading Commission (CFTC) to prohibit prediction market contracts tied to wildfires, arguing that such products create dangerous incentives to profit from natural disasters.

In a letter sent earlier this week to CFTC Chair Michael Selig, Sen. Jeff Merkley (D-Ore.), Sen. Alex Padilla (D-Calif.), Sen. Adam Schiff (D-Calif.), and six other Democratic senators asked the agency to ban wildfire-related event contracts. They warned that these contracts could encourage arson, enable insider trading, and jeopardize public safety.

"Offering bets on destructive wildfires threatens to minimize communities' suffering all so the rich and powerful can profit," the senators wrote. "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 pointed to reports that Polymarket accepted more than $1.2 million in bets tied to California's Palisades and Eaton fires in 2025. The fires, which swept through the Los Angeles area in January, destroyed thousands of structures and displaced tens of thousands of residents, making them among the most destructive wildfires in California history. They also cited newer platforms allowing users to wager on wildfires, arguing that these markets encourage speculation on destructive events.

"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," they wrote.

Prediction markets allow users to buy and sell contracts based on whether future events will occur. The CFTC regulates certain types of these contracts through Designated Contract Markets, which must demonstrate that their products are not contrary to the public interest. Platforms such as Myriad, launched by Decrypt's parent company Dastan, have gained significant traction in recent years, enabling users to predict outcomes ranging from crypto market movements to geopolitical events.

The senators urged the CFTC to act before the start of next year's wildfire season. "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 (DCMs) try to offer these," the letter stated. "The CFTC must lead the charge to rein in these contracts in the U.S. and offshore and put in place common-sense guardrails to prevent people from profiting as wildfires threaten communities."

Polymarket has operated from outside the U.S. since settling with the CFTC in 2022 for $1.4 million over allegations it offered unregistered binary options, agreeing at the time to block American users from its platform.

The letter arrives as prediction markets face intensifying scrutiny from lawmakers and regulators nationwide. In April, investment bank Bernstein projected that annual trading volume could reach $1 trillion by 2030 as more institutional investors enter the market. That same month, President Donald Trump softened his criticism of prediction markets after previously saying they had turned the world into "a casino."

The regulatory battle over prediction markets has escalated in recent months. In May, Minnesota became the first state to ban prediction markets, only for the CFTC and Department of Justice to sue the state, arguing the law conflicted with federal authority.

In June, Kentucky sued Kalshi and Polymarket over claims they were operating illegal sports betting platforms. That same month, a federal judge in Michigan ruled that sports prediction markets are not regulated by the CFTC, further complicating the question of which authority should oversee the industry.