U.S. Rep. Michael Baumgartner has proposed a bill to prohibit federally regulated prediction markets from offering event contracts on wildfires due to concerns about incentivizing arson.

Parts of U.S. Rep. Michael Baumgartner’s (R-Wash. 5th Dist.) region, including Spokane County, were severely affected by wildfires in recent months.

While there is no evidence linking any fires to prediction-market traders, Baumgartner aims to eliminate the potential for such incidents in the future.

“We’ve already had enough problems with arsonists causing wildfires in Eastern Washington, we don’t need betting markets giving potential big financial incentives to start fires,” Baumgartner stated.

“When a wildfire threatens a community, every effort should be focused on protecting families, homes, and first responders,” he added. “Congress should draw a clear line and make sure federally regulated markets cannot facilitate wagers on the devastation of American communities.”

‘Perverse Incentives’

Nine Democratic senators recently urged the Commodity Futures Trading Commission (CFTC) to reject wildfire-related event contracts due to concerns about creating harmful incentives and exploiting human suffering.

Polymarket previously allowed over $1.2 million in trades on contracts related to wildfires in Los Angeles, leading to the senators’ concerns.

Currently, no CFTC-regulated prediction market exchange offers wildfire event contracts to U.S. users.

Prior markets on offshore platforms like Polymarket covered fire spread, containment, and total acreage burned, potentially incentivizing individuals to start or exacerbate fires for financial gain.

Market Information

Despite the risks associated with these markets, Polymarket argues that removing them does not prevent disasters but hinders access to valuable market information for understanding potential outcomes.

Since August 1, authorities have arrested individuals on suspicion of arson in Spokane County, with no links to prediction market trading observed.