House bill would ban wildfire bets on federally regulated prediction markets

A proposed U.S. House bill aims to ban federally regulated prediction markets from allowing traders to place bets on wildfires and their destruction. Introduced by Rep. Michael Baumgartner, H.R. 10109, dubbed the "Wildfire Event Contract Prohibition Act," seeks to amend the Commodity Exchange Act. This would prevent registration entities from listing, clearing, or trading a broad range of wildfire contracts.

These include bets on a wildfire's initiation, location, duration, size, intensity, spread, containment, as well as those concerning evacuations, injuries, deaths, or property damage.

According to supporters, wildfire bets on prediction markets could incentivize arson and insider trading. Eight Democratic senators, including Adam Schiff and Alex Padilla, have expressed similar concerns to Commodity Futures Trading Commission Chair Michael Selig. They warn that the contracts could create improper financial incentives for individuals to influence wildfires, raising safety and insider trading issues.

Arizona Governor Katie Hobbs has also taken action, signing an executive order on July 9 barring state government employees from using non-public information for profit in prediction markets. She aims to maintain ethical standards and accountability in government.

The proposed bill directs the attorney general to review criminal and civil powers within 180 days, along with the CFTC Chair, Agriculture and Interior secretaries, and other officials. The review will examine issues like wildfire-setting for wagering profits, trading on non-public fire information, market manipulation, fraud, money laundering, forfeiture, illegal gambling, and cross-border activity.

Officials will also assess coordination gaps and determine if additional penalties, reporting rules, or information-sharing powers are necessary.