A coalition of Democratic senators is pressing the Commodity Futures Trading Commission (CFTC) to restrict or entirely prohibit prediction market contracts linked to wildfires, warning that allowing individuals to profit from fires burning longer and hotter could create a financial incentive for arson.

The effort, led by Senator Jeff Merkley of Oregon — a state that has faced some of the most destructive wildfires in the American West — was submitted to the CFTC on August 3, 2026. The senators characterize the current period as yet another "record-breaking fire season" and are urging regulators to intervene before financial speculation and real-world destruction become further entangled.

During the devastating Los Angeles wildfires in January 2025, offshore betting platforms processed more than $1.2 million in wagers on fire-related outcomes. Traders bet on metrics including total acreage burned and the length of time required to contain specific blazes, notably the Palisades and Eaton fires. Those fires destroyed thousands of structures and displaced tens of thousands of residents across the Los Angeles area.

No confirmed incidents of arson have been linked to prediction market activity. The senators' concerns remain theoretical, grounded in the possibility that financial incentives could eventually motivate someone to deliberately start a fire.

CFTC-regulated platforms have already distanced themselves from such contracts. Kalshi does not list wildfire-specific markets, and neither does Polymarket's US-facing operations. The wildfire betting activity that prompted the senators' letter took place on offshore platforms, which fall largely outside the CFTC's direct jurisdictional reach — a limitation that has long constrained US regulators addressing offshore gambling and prediction activity.

Separately, a play-money platform called Wyldfyre has launched with a focus on California wildfire predictions. No real money is involved — the platform is designed to aggregate crowd-sourced forecasts without actual financial stakes.

The broader regulatory landscape for prediction markets remains contested. Kalshi successfully sued the CFTC in court to secure the right to offer election contracts, a ruling that opened the door to a wider range of event-based markets on regulated US platforms. Polymarket, which operates on the Polygon blockchain, gained widespread recognition during the 2024 presidential race and has since become one of the most heavily used prediction platforms globally, though its availability to US users remains restricted.

The wildfire debate underscores a fundamental tension within prediction markets: they tend to perform best when covering events with real-world consequences, but those same scenarios are also when the ethical questions become most pronounced. The CFTC has not publicly indicated a timeline for responding to the senators' request.