Nine U.S. senators demanded that the Commodity Futures Trading Commission answer questions about wildfire prediction market contracts by August 14, 2026. The letter—and the Guardian coverage that amplified it—raised two distinct questions that are often conflated: the political argument (should these markets exist?) and the legal mechanics (what can the CFTC actually do, and by when?).
This page answers the second question. For the political context and moral hazard debate, see the senator letter explainer.
What this page covers
Nine Democratic senators led by Jeff Merkley (D-OR) sent a letter to CFTC Chair Michael Selig demanding action on wildfire prediction market contracts.
Signatories: Padilla (CA), Shaheen (NH), Schiff (CA), Rosen (NV), Cortez Masto (NV), Heinrich (NM), Wyden (OR), Klobuchar (MN). They asked the CFTC to address wildfire contracts in its ongoing rulemaking (RIN 3038-AF65).
The senators invoke the Commodity Exchange Act (CEA)—the primary federal law governing CFTC-regulated prediction markets. Their argument centers on the CFTC's power to designate event contracts as prohibited when they are determined to be contrary to the public interest.
Statutory Authority Cited
7 U.S.C. § 7a-2(c)(5)(C) — Commodity Exchange Act: CFTC may prohibit an event contract it determines is 'contrary to the public interest.' Ongoing rulemaking under this provision: RIN 3038-AF65.
Read at Cornell Law LIIScope of That Authority
Under CEA § 5c(c)(5)(C), the CFTC may designate event contracts as prohibited if the Commission determines they are contrary to the public interest. This authority covers CFTC-regulated Designated Contract Markets (DCMs). Offshore platforms outside CFTC jurisdiction are not directly reachable under this provision without separate international regulatory coordination.
The "Public Interest" Standard
The CEA's event-contract provision gives the CFTC authority to block contracts it determines are against the public interest. What counts as "against the public interest" is not defined by formula—it's a regulatory judgment. The senators argue that wildfire contracts meet this threshold because they could create incentives to influence wildfire outcomes and commodify community suffering.
The CFTC's ongoing notice-and-comment rulemaking (RIN 3038-AF65) is the procedural vehicle through which the agency could formally incorporate wildfire contracts into the prohibited category—or explicitly decline to do so.
What a Congressional Letter Is—and Isn't
A letter from senators is an oversight request, not a legal mandate. The CFTC is an independent federal agency. It may respond to the senators' questions, take voluntary action, or decline to act—and senators cannot compel specific regulatory outcomes through a letter alone. If the CFTC does not act to their satisfaction, legislators can escalate through oversight hearings, budget pressure, or legislation such as Senator Merkley's previously introduced STOP Corrupt Bets Act.
The senators' letter requests answers to specific questions by August 14, 2026. This is a congressional inquiry deadline—not a rulemaking deadline. The CFTC has no legal obligation to take regulatory action by this date; it must only provide responses to the senators' questions.
What the Senators Are Asking By August 14
The senators did not demand an emergency regulatory action by August 14. They requested written answers to four specific questions:
Regulatory vs. Inquiry Deadlines
It is important to distinguish between a congressional inquiry deadline and a regulatory action deadline. The CFTC could respond by August 14 with a detailed answer that commits to no immediate rulemaking, or it could indicate that it is incorporating wildfire contracts into its ongoing rulemaking process. Either response would technically satisfy the senators' request—even if it does not result in a ban.
If the CFTC Does Not Respond
A non-response does not trigger automatic regulatory action. Senators can escalate through congressional oversight mechanisms—hearings, follow-up letters, budget committee pressure—or through legislation. Senator Merkley has previously introduced the STOP Corrupt Bets Act, which would explicitly prohibit certain categories of prediction market contracts.
The Rulemaking Track
Even if the CFTC decides to restrict wildfire contracts, doing so via formal rulemaking takes longer than two weeks. A Notice of Proposed Rulemaking (NPRM) requires a public comment period (typically 30–60 days), staff review of comments, and a final rule—a process that typically takes months to over a year. The existing NPRM (RIN 3038-AF65) is the vehicle the senators asked to be used for wildfire contracts.
Both major CFTC-regulated prediction market platforms had already declined to offer wildfire contracts before the senator letter was sent. The senators' letter focused primarily on offshore market activity that predated the letter.
| Platform | Wildfire Contracts | Source |
|---|---|---|
| Kalshi (U.S. DCM) | Prohibited | Kalshi.com/policy-center |
| Polymarket U.S. (DCM) | Not offered | Polymarket.com |
Kalshi
Kalshi has stated it prohibits wildfire contracts on its CFTC-regulated exchange. The platform's banned-markets page lists prohibited categories including war, death, nuclear war, assassination, kidnapping, rocket explosion, and missile strike markets. A company spokesperson indicated wildfire contracts are also prohibited due to perverse-incentive concerns.
Polymarket U.S.
Polymarket U.S., the CFTC-regulated entity, does not offer wildfire-specific contracts. Offshore Polymarket activity on past wildfire events (2025 Palisades and Eaton fires) is outside CFTC jurisdiction.
For the most current contract availability, confirm directly at each platform's official site. Platform policies can change.
Scenario A: CFTC Responds With Rulemaking Commitment
The CFTC responds to senators' questions by August 14 and indicates it will incorporate wildfire contracts into its ongoing rulemaking (RIN 3038-AF65). A formal NPRM or supplemental NPRM would follow—typically a 30–60 day public comment period, then a final rule. Full restriction, if enacted, would likely take months.
For traders:
No immediate change. Existing CFTC-regulated platforms already prohibit wildfire contracts. Offshore activity remains outside CFTC jurisdiction unless additional enforcement is pursued.
Scenario B: CFTC Responds But Takes No New Action
The CFTC answers the senators' questions by August 14 but indicates it does not believe new rulemaking is warranted—either because existing DCM rules are adequate or because it declines to restrict wildfire contracts at this time. Senators could escalate via legislation or oversight hearings.
For traders:
No immediate change to access. Domestic platforms continue under existing rules. The legislative track (STOP Corrupt Bets Act or similar legislation) would remain as senators' primary lever.
Scenario C: CFTC Does Not Respond By August 14
The CFTC provides no written response by the senators' deadline. Congressional inquiry deadlines carry no legal enforcement mechanism—senators cannot compel a response or trigger automatic regulatory action. Senators would likely escalate through oversight hearings, additional letters, or legislation.
For traders:
No immediate regulatory change. The underlying NPRM rulemaking process continues on its own timeline. Senators may increase public pressure or introduce targeted legislation.
What senators argued, what the moral hazard concern is, and what the CFTC letter actually says.
The full picture of court battles, state actions, and regulatory challenges facing Kalshi.
How pending legislation intersects with the CFTC's existing event-contract authority.
