A bipartisan bloc of Democratic senators representing wildfire-affected states is pressing the CFTC to act on a question the agency has so far left open: should prediction market contracts on wildfires be permitted at all?
The letter — a political signal, not a binding legal action — asks the CFTC whether it plans to restrict or ban wildfire event contracts as part of its ongoing rulemaking on prediction market public interest standards (RIN 3038-AF65). The CFTC has not publicly responded.
Date
August 3, 2026
Addressed To
CFTC Chair Michael Selig
Signatories
9 senators
Response Deadline
August 14, 2026
All Signatories
Core request (from the letter):
"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."
Three distinct concerns in the letter
The senators' primary concern: a person with the ability to influence a wildfire — by starting one or by worsening an ongoing fire — could profit from a longer or larger burn. State and local fire officials cited in the letter noted this risk. The senators argue that creating a financial incentive to extend wildfires is contrary to the public interest, regardless of how unlikely individual incidents of arson-for-profit may be.
"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 argue that allowing financial profit from wildfire duration and scope "threatens to minimize communities' suffering all so the rich and powerful can profit." This moral-hazard argument goes beyond arson risk: it says that even absent deliberate manipulation, prediction markets on disasters create a class of people who benefit from worse outcomes — an incentive structure that conflicts with public disaster-response coordination.
"Offering bets on destructive wildfires threatens to minimize communities' suffering all so the rich and powerful can profit."
The senators note that prediction markets have been enabled to expand rapidly, "increasingly inviting speculation on war, political violence, disasters, and public emergencies that raise ethical and public policy concerns." Their implicit argument: unconstrained contract categories threaten the political legitimacy that CFTC-regulated prediction markets depend on. Wildfire contracts, in their view, risk regulatory backlash that damages the broader prediction market ecosystem.
State geographic bans vs. federal category-based restrictions
Most of the prediction market regulatory fights you've read about are geographic: state X decides the platforms are illegal gambling and tries to stop them from operating in state X. The senators' letter is different — it asks for a category-based federal restriction: ban the wildfire contract type everywhere, regardless of which state the user is in.
| Aspect | State Geographic Ban | Federal Category Restriction (Senators' Request) |
|---|---|---|
| Scope | Geographic — applies only within a specific state's borders | Category-based — would apply everywhere, including offshore |
| Authority | State gaming commissions, AGs, state courts | CFTC rulemaking or emergency order |
| How it works | State bans or restricts the platform operating in that state | CFTC prohibits listing of the specific contract type by any DCM |
| Platform impact | Kalshi/Polymarket can't serve users in that state | No CFTC-regulated platform can offer wildfire contracts anywhere |
| Offshore reach | None — only affects domestic platforms' state operations | CFTC can ask offshore platforms to comply but lacks direct enforcement |
| Examples | WA enforcement (Aug 5), Michigan TRO, Minnesota injunction | None yet — music chart markets banned in 2021 is closest precedent |
The Key Distinction for Traders
State enforcement actions affect whether you can use a platform at all if you're a resident of that state. A CFTC category restriction would affect whether any CFTC-regulated platform can offer a specific contract type — regardless of where you live. The senators want the CFTC to address this both domestically (DCMs) and by pressuring offshore platforms, though the CFTC's authority over offshore markets is limited.
A congressional letter is not a rulemaking — here's how regulatory action actually works
Congressional letters do not compel CFTC action. The CFTC may respond to the senators' questions by their August 14 deadline, acknowledge the concerns, and note that the ongoing rulemaking (RIN 3038-AF65) is the appropriate venue. CFTC-regulated platforms already don't offer wildfire contracts, making immediate action less urgent from the CFTC's perspective.
The CFTC's current rulemaking (RIN 3038-AF65) asks which event contracts are against the public interest and should be prohibited. The senators are explicitly asking the CFTC to include wildfire contracts in that analysis. This would mean formal notice, public comment, and a final rule — a process that takes months to years. The outcome is uncertain and depends on the rulemaking record.
Under the Commodity Exchange Act, the CFTC can issue emergency orders to restrict or prohibit contract trading when it finds "an emergency exists." This authority is rarely invoked and requires a formal finding. Given that CFTC-regulated platforms already don't offer wildfire contracts, there is no current market disruption requiring emergency action. An emergency order targeting offshore platforms would also face significant jurisdictional limitations.
To prohibit a contract type, the CFTC must find it is "contrary to the public interest" under Section 5c(c)(5)(C) of the Commodity Exchange Act. The analysis considers whether the contract:
The senators' letter is structured to hit all three criteria for wildfire contracts: arson risk (public safety law), moral hazard (public interest), and questioning the legitimate economic purpose of betting on a disaster's severity.
As of August 3, 2026, the CFTC had not publicly responded to the senators' letter. The senators requested a response by August 14, 2026. The CFTC's position on wildfire contracts may emerge through its ongoing rulemaking process (RIN 3038-AF65).
Which prediction markets offer wildfire contracts — and which don't
Kalshi has stated it prohibits wildfire contracts on its CFTC-regulated exchange.
Polymarket U.S., the CFTC-regulated entity, does not offer wildfire-specific contracts.
The offshore Polymarket platform is outside CFTC jurisdiction. It offered trading on the 2025 California wildfire events and is the platform the senators' letter specifically references.
How Congress Oversees Prediction Markets
The mechanics of congressional oversight — hearings, letters, and what actually compels the CFTC to act.
CFTC Rulemaking on Prediction Markets
The ongoing NPRM (RIN 3038-AF65) is the formal process where the CFTC decides which contracts are against the public interest.
Prediction Markets by State
Full 50-state tracker: where prediction markets are restricted, permitted, or under litigation.
The Minnesota Federal Injunction
A federal court blocked a state's prediction market ban — the CFTC preemption ruling Kalshi cites.
CLARITY Act: What Passes, What Doesn't
How federal legislation could clarify — or complicate — the CFTC's authority over prediction markets.
Wildfire Contracts: What the CFTC Must Decide by August 14
The statutory authority senators cited, what the deadline actually requires, and three possible outcomes.
