Wildfire prediction markets are exactly what they sound like — contracts that let traders take positions on wildfire-related outcomes such as acres burned, duration, or geographic spread. In the U.S., no CFTC-regulated exchange currently offers them. The debate about whether they should exist has moved from niche regulatory circles to the U.S. Senate floor.
This guide covers where these markets exist, why lawmakers are alarmed, what the CFTC can legally do, and how the moral-hazard argument stacks up against the case for allowing them.
Here is where things stand as of August 2026 across U.S.-regulated and offshore platforms.
| Platform | Regulated by | Wildfire contracts | Notes |
|---|---|---|---|
| Kalshi | CFTC (U.S. DCM) | Not offered | Does not offer wildfire contracts. Banned-markets policy |
| Polymarket U.S. | CFTC (U.S. DCM) | Not offered | Sports-only beta; no wildfire contracts. |
| Polymarket (offshore) | Not CFTC-regulated | Available | Offshore site offered markets on 2025 LA fires. Outside CFTC jurisdiction; not available to U.S. users under its terms. |
| Wyldfyre | Unregulated | Play-money only | New simulated platform. No real money; not subject to CFTC oversight. |
A wildfire prediction market is an event contract where the outcome is tied to a measurable wildfire metric — for example, whether a specific fire exceeds a threshold of acres burned, whether containment is achieved by a given date, or whether a named fire grows larger than a specified level.
Under standard prediction market mechanics, traders who believe a fire will grow larger buy the "Yes" side of the contract. Those who think it will be contained buy "No." The price reflects the market's probability estimate at any given moment.
The contracts that generated attention on the offshore Polymarket site in January 2025 were tied to the Palisades and Eaton fires in the Los Angeles area. Estimates cited in the senators' letter suggest approximately $1.2 million in offshore trading volume on those markets — a small amount relative to the overall Polymarket platform, but enough to trigger congressional concern.
9 Democratic senators led by Jeff Merkley (D-OR), including Amy Klobuchar (Ranking Member, Senate Agriculture Committee).
All nine represent states with significant wildfire exposure: CA, OR, NV, NM, NH, MN.
Whether the CFTC will prohibit DCM wildfire event contracts in its ongoing public-interest rulemaking, curb U.S. and offshore wildfire betting, and clarify whether contracts on wildfire duration, destruction, and growth are in the public interest.
The letter was addressed to CFTC Chair Michael Selig and requested a response by August 14, 2026. The senators invoked the CFTC's ongoing rulemaking (RIN 3038-AF65), which covers public-interest determinations for event contracts — the same proceeding that has drawn attention in relation to sports contracts.
The deadline is a congressional request, not a legal order. The CFTC is not required to meet it, but the Agriculture Committee — through which Klobuchar exercise oversight — can compel testimony, hold hearings, and shape the CFTC's budget process.
The senators specifically noted that the offshore Polymarket site saw trading on the 2025 Los Angeles fires while arguing that U.S.-regulated platforms could follow without explicit CFTC guardrails. Because Kalshi and Polymarket U.S. already don't offer these markets, the letter is largely prospective — aimed at preventing future listings rather than shutting down existing ones.
Arson incentive: The senators' core argument: a person able to influence a wildfire's duration or scope could profit from a longer or larger burn. No confirmed arson linked to wildfire betting has been reported as of the letter date.
Community harm: Critics argue that creating financial beneficiaries of disaster outcomes undermines collective disaster response and normalizes profiting from suffering.
Regulatory gap: The CFTC's June 2026 NPRM excluded natural disasters from the list of formally prohibited contract categories — senators want that closed.
Information value: Aggregated market prices on fire risk could provide useful signals for insurance pricing, emergency resource allocation, and climate modeling.
Tiny leverage: A $1,000 bet on an offshore platform represents virtually no incremental incentive for arson compared to the existing incentives (insurance fraud, land development) that already exist.
No confirmed incidents: No arson linked to wildfire prediction market activity has been publicly reported.
Three realistic paths forward, in order of likelihood:
The CFTC responds to the senators' letter and notes that the ongoing rulemaking (RIN 3038-AF65) is the appropriate venue for addressing wildfire contracts. No immediate action; outcome depends on the final rule.
The CFTC issues a staff letter or advisory warning DCMs to apply heightened due diligence before listing natural-disaster contracts, without formal rulemaking. This would not have the force of law but would signal enforcement priorities.
A separate rulemaking that explicitly adds wildfire contracts to the categories prohibited under CEA §5c(c)(5)(C). This would take months to years, require public comment, and likely face legal challenge. Currently a distant prospect.
The Commodity Exchange Act gives the CFTC two main tools for restricting event contracts:
Because wildfire is not in the permanent-prohibition list and the NPRM is still in the comment period, there is currently no mechanism for the CFTC to ban wildfire contracts immediately without either emergency action or new rulemaking.
January 2025
Palisades and Eaton fires burn across Los Angeles. Offshore Polymarket sees trading activity on fire-related markets.
June 2026
CFTC publishes NPRM (RIN 3038-AF65) on public-interest determinations for event contracts. Natural disasters not included in proposed prohibited categories.
August 3, 2026
Jeff Merkley leads 9 senators in sending letter to CFTC Chair Michael Selig demanding action on wildfire prediction markets.
August 14, 2026
Senators' requested deadline for CFTC response. No legal obligation to respond by this date.
No U.S.-regulated exchange currently offers wildfire contracts. If you trade on Kalshi or Polymarket U.S., your account and open positions are not affected by this debate.
The CFTC response to the senators (requested by August 14, 2026) may preview how it plans to handle natural-disaster contracts in the final NPRM rule.
If you are trading wildfire markets on an offshore platform, those trades are outside U.S. regulatory protection. You have no CFTC recourse and the platform's terms govern your funds.
The NPRM (RIN 3038-AF65) comment period is the mechanism most likely to produce formal rules on this category. Watch for the CFTC's final rule.
