Senators Press CFTC on Wildfire Event Contracts After $1.2 Million in Polymarket Trades

Meta description: Nine Democratic senators asked the CFTC to address wildfire event contracts after $1.2 million in Polymarket trading on LA fires.

Tags: CFTC, Polymarket, Kalshi, Jeff Merkley, Adam Schiff, Wildfires

Market platform: none-if-cross-platform

Category: Regulation

Nine Democratic senators asked Commodity Futures Trading Commission Chair Michael Selig to consider barring U.S.-regulated exchanges from listing wildfire event contracts, citing more than $1.2 million in Polymarket trading tied to the Palisades and Eaton fires in January 2025. The August 3, 2026 letter requested answers by August 14.

Which senators signed the wildfire letter?

The letter was led by Sen. Jeff Merkley of Oregon and signed by Sens. Martin Heinrich of New Mexico, Alex Padilla of California, Jeanne Shaheen of New Hampshire, Adam Schiff of California, Jacky Rosen of Nevada, Catherine Cortez Masto of Nevada, Ron Wyden of Oregon, and Amy Klobuchar of Minnesota.

Klobuchar is the top Democrat on the Senate Agriculture Committee, which oversees the CFTC. The signatories framed wildfire markets as part of a broader dispute over how far prediction market platforms should be allowed to go when contracts touch public emergencies, disasters, war, political violence, or other events with direct human consequences.

In the Senate letter to Selig, the lawmakers asked whether the CFTC is considering a prohibition on Designated Contract Markets, or DCMs, offering wildfire event contracts as part of the agency’s prediction-market rulemaking process. They also asked whether the agency has plans to address similar contracts on offshore markets.

“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,” the senators wrote in the letter published by Senate offices.

What wildfire contracts did Polymarket offer?

The senators cited public reports that the international Polymarket platform accepted more than $1.2 million in trades surrounding the Palisades and Eaton fires, which burned in Los Angeles County in January 2025. The letter said those markets covered questions including how long a wildfire would last, how much it would destroy, and how much it would grow.

The distinction between offshore and U.S.-regulated platforms matters. The wildfire markets cited by the senators were tied to Polymarket’s international platform, while Polymarket US is operated by QCX LLC d/b/a Polymarket US, a CFTC-regulated designated contract market. A domestic CFTC listing prohibition would apply most directly to registered U.S. exchanges, not automatically to offshore markets.

The Palisades and Eaton fires killed 31 people and destroyed more than 16,000 structures across Los Angeles-area communities. Insurance Journal, citing Bloomberg reporting and Senate materials, reported that Polymarket hosted markets tied to acreage, containment timing, and whether the fires would spread to specified areas.

Another site, Wyldfyre, has described itself as a play-money prediction platform focused on wildfires. Its structure puts it outside the same regulatory lane as a CFTC-registered DCM listing real-money event contracts, but the senators’ letter treated the broader category as a public-policy problem rather than only a registration question.

What is the senators’ argument against wildfire markets?

The senators’ core argument is that wildfire contracts create moral-hazard and market-integrity risks that differ from ordinary political or economic event contracts. In their letter, they said contracts tied to destructive fires can commodify community losses and create incentives for traders to profit from worsening emergency conditions.

The arson concern is the sharpest version of that argument. The Senate letter said wildfire event contracts “run the risk of encouraging people to influence fires,” and asked whether the CFTC views markets on wildfire duration, destruction, or growth as consistent with the public interest.

That claim sits inside a difficult policy distinction. Michael Gollner, a wildfire researcher at the University of California, Berkeley, told Insurance Journal that most California wildfires are human-caused, but most ignitions are accidental rather than deliberate. Arson exists, but it is not the main driver of California’s wildfire exposure.

The letter also raised insider-information concerns. Fire officials, utility workers, emergency responders, and others can have access to operational information before it becomes public. In a market where the payoff depends on acreage, containment, spread, or timing, that information can have trading value.

Insurance Journal reported, citing a California Department of Forestry and Fire Protection spokesperson, that Cal Fire personnel are prohibited from using nonpublic information to participate in prediction markets. The senators’ federal question is broader: whether market rules and CFTC oversight can prevent informed insiders from exploiting wildfire contracts across platforms.

How does this fit into the CFTC’s event-contract rulemaking?

The CFTC opened a prediction-market rulemaking track on March 16, 2026 through an Advance Notice of Proposed Rulemaking published in the Federal Register. In that notice, the agency said DCMs certified about 1,600 event contracts in 2025, up from an average of about five per year from 2006 through 2020.

The March notice asked for public comment on how the CFTC should treat prediction markets, including product eligibility, risk management, reporting, clearing, surveillance, and the application of DCM core principles. It also said several pending DCM applications came from entities primarily or exclusively interested in operating prediction markets.

The agency then published a June 10, 2026 notice of proposed rulemaking on event contracts involving enumerated activities. That NPRM is the more immediate procedural backdrop for the senators’ August letter because it puts public-interest limits on event contracts into an active rulemaking posture.

Rather than asking Congress to create a new statutory ban, the senators asked the CFTC whether it will use existing contract-review and rulemaking tools to stop U.S.-regulated exchanges from listing a category of event contract the lawmakers say is contrary to the public interest.

The Commodity Exchange Act gives the CFTC authority over swaps and futures traded on registered markets. The CFTC’s public investor-education materials say event contracts are frequently structured as swaps and that registered exchanges must establish and enforce rules against fraud, manipulation, and unfair trading practices, including insider trading.

How have platforms responded to the wildfire criticism?

Polymarket defended the wildfire markets as a source of public information. In a statement reported by Insurance Journal, the company said people turn to Polymarket for information during fast-moving events and argued that removing the contracts would make market-based information less accessible.

That defense mirrors a broader industry argument: prediction markets can aggregate expectations faster than conventional commentary, especially when an event is unfolding in real time. The senators’ letter challenges whether that information value is enough when a contract is linked to deaths, evacuations, destroyed homes, and emergency response decisions.

Kalshi, a CFTC-regulated prediction market exchange, has not offered wildfire contracts. A Kalshi spokesperson told Insurance Journal that the company does not list wildfire markets because they can create perverse incentives. Kalshi has offered other weather-related contracts, but the wildfire issue sits closer to markets on potentially influenced public harms than to temperature or rainfall contracts.

The distinction matters for the CFTC. A domestic prohibition on wildfire contracts would most directly affect registered exchanges such as Kalshi, Polymarket US, or any future DCM that seeks to list disaster-related markets. It would not, by itself, remove offshore markets operating outside direct CFTC supervision.

What is the next regulatory milestone?

The senators requested written answers from Selig by August 14, 2026. No agency response had been announced in public CFTC materials by late August.

The next concrete marker is how the CFTC handles its 2026 event-contract rulemaking record, including the June 10 NPRM and the broader March ANPRM. If the agency defines wildfire contracts as contrary to the public interest, the issue could become an early test of how far federal regulators are willing to draw product-level limits before disaster-related markets reach U.S.-regulated exchanges.