More than $1.2 million changed hands on prediction markets contracts tied to the Palisades and Eaton fires in January 2025, according to Insurance Journal. While families evacuated Los Angeles neighborhoods, traders watched contract prices move like stock tickers. A group of senators from Oregon, California, Nevada, Minnesota, and New Hampshire sent a letter to the CFTC on August 3, 2026, demanding answers: should betting on wildfire destruction be legal at all? The agency hadn’t responded as of Ars Technica’s reporting.
Betting on Disaster
Prediction markets let traders wager on wildfire outcomes, and critics say the model is structurally broken.
Traditional prediction markets let you bet on elections or economic data. Wildfire contracts work the same way — traders wager on whether a fire exceeds a certain acreage or destroys a threshold number of structures. Polymarket hosted such contracts during the January 2025 LA fires. CFTC-regulated platforms, including Kalshi and Polymarket’s domestic arm, don’t currently list wildfire-specific contracts, Insurance Journal reported. The disputed activity lived offshore, in the prediction-market equivalent of international waters.
UC Berkeley fire researcher Michael Gollner told Ars Technica the markets could create “a perverse incentive for arson or other destructive activities.” Grassroots Wildland Firefighters president Riva Duncan called the notion of profiting from tragedy “beyond comprehension.” These aren’t abstract complaints. A market that rewards catastrophe has a structural interest in catastrophe continuing — like designing a fitness app that pays you more the sicker you get.
Then a Spokane resident was arrested on August 4, 2026, accused of using matches to ignite roadside grass as three wildfires burned around the city, according to Reuters — and suddenly the senators’ “perverse incentive” argument stopped sounding theoretical.
What the Platforms Say
Polymarket and Kalshi landed on opposite sides of the debate, while the CFTC stayed silent.
The core of Polymarket’s defense, relayed to Ars Technica, is that it doesn’t “profit from outcomes” and that removing these markets reduces access to accurate information. Kalshi took the opposite stance, telling Ars Technica it bars wildfire markets precisely because of perverse incentives — making it the rare fintech company that voluntarily sided with the critics.
The CFTC’s eventual response could redraw the boundaries of what prediction markets are allowed to touch — wildfires today, floods or mass-casualty events tomorrow. The question isn’t whether these markets generate useful data. The question is what you’re willing to commodify to get it.
