Senators urge ban on wildfire predictions market

Oregon Governor's Office

With wildfire season at its peak in the western United States, nine senators, all Democrats, asked the Commodity Futures Trading Commission to crack down on prediction markets' offering contracts for individuals to bet on wildfires.

The senators said in a letter to CFTC Chair Michael Selig they want the agency to halt unrestricted betting on wildfires by installing guardrails to prevent gamblers from profiting on wildfires that threaten communities nationwide.

It is shaping up to be another bad year for wildfires in the west.

Oregon and Washington governors have already declared states of emergency as blazes wreak havoc in their states. California Gov. Gavin Newsom announced Tuesday he will deploy 20 Cal Fire engines and four California-based Rapid Extraction Module Support teams to support firefighting efforts in those states.

In the letter, the officials said their action was prompted by reports of public safety and insider trading concerns related to prediction market platforms that offer wagering on natural disasters, such as wildfires.

The signers of the letter included: Sen. Jeff Merkley, D-Ore., Sen. Alex Padilla, D-Calif., Sen. Jeanne Shaheen, D-N.H., Sen. Adam Schiff, D-Calif., Sen. Jacky Rosen, D-Nev., Sen. Catherine Cortez Masto, D-Nev., Sen. Martin Heinrich, D-N.M., Sen. Ron Wyden, D-Ore., and Sen. Amy Klobuchar, D-Minn.

"Offering bets on destructive wildfires threatens to minimize communities' suffering all so the rich and powerful can profit," according to the letter.

"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," according to the letter. "By offering contracts on fires, prediction market sites run the risk of encouraging people to influence fires that have already started, creating additional concerns around public safety and insider trading."

Muni analysts weighed in on the impact the prediction markets, which allow traders to bet on the outcome of events, could have on the muni market in a Bond Buyer article in July, after bets were placed on Illinois' pension system funding liability.

The upshot from analysts was the rapid expansion of prediction markets, like Kalshi, presents both unique risks and emerging data opportunities for municipal bonds, especially as platforms launch event contracts tied to public debt and local government fiscal health.

Merkley, who led efforts in crafting the letter and attracting signers, has been an opponent of the industry's potential effect on government since Kalshi offered betting on elections in 2023.

He introduced a bill in March with Klobuchar called the End Prediction Market Corruption Act, which would ban the president, vice president, and members of Congress and other public officials from trading event contracts.