Gambling on Disaster: The Ethics of Wildfire Prediction Markets

Prediction markets like Polymarket allow users to wager on the outcomes of natural disasters, including the January 2025 Southern California wildfires. While these platforms provide real-time odds, officials and ethicists warn that betting on wildfire behavior creates dangerous incentives for arson and potential insider trading.

How do prediction markets function during a disaster?

Prediction markets act as gambling platforms where participants bet on the specific outcomes of real-world events. These markets typically use a “yes” or “no” format for queries, with contract prices fluctuating between $0 and $1. According to the mechanics of these platforms, a contract priced at 50 cents suggests that the collective betting pool views the event as having a 50 percent probability of occurring.

Market hosts generate revenue by charging fees on these wagers. While the scope of these markets can include elections, sports, and weather, the recent expansion into disaster outcomes has sparked significant debate. Users can bet on a wide range of variables, from the spread of infectious diseases to the specific movement of international incidents.

What specific bets were placed on the California wildfires?

During the Eaton and Palisades fires in January 2025, Polymarket’s “markets team” created nearly 20 distinct questions related to the blaze. These queries focused on the progression and containment of the fires. Specific examples included whether the Palisades Fire would reach Santa Monica by a certain Sunday or how many acres the fire would burn by a specific Friday.

Data from Aeon Magazine indicates that users wagered $1.2 million on these specific wildfire queries. The fires, which included the Eaton and Palisades blazes, resulted in the destruction of more than 16,000 structures and caused 31 deaths in the Southern California region.

Why do officials fear these markets encourage arson?

The ability to tie financial gain to the severity of a wildfire creates what experts call a “perverse incentive.” Because a single individual can manipulate the growth of a fire through arson, the risk of intentional property destruction is heightened.

“Systems that tie financial gain to wildfire outcomes risk encouraging misuse, including arson, and are not compatible with our mission,” a spokesperson for the US Forest Service stated.

Beyond physical arson, there is a secondary risk regarding information asymmetry. Ann Skeet, the senior director of leadership ethics at the Markkula Center for Applied Ethics at Santa Clara University, noted that the markets could attract “bad actors.” Skeet highlighted that firefighters or land managers with access to exclusive, non-public information regarding firefighting plans or fire behavior could use that data to bet, a practice equivalent to insider trading.

What are the ethical implications for affected communities?

For those who lost homes and livelihoods, the existence of these markets is viewed as a moral failure. Sylvie Andrews, who lost her home in the Eaton Fire, described the practice as “morally reprehensible.”

The human cost of the fires stands in stark contrast to the financial activity on prediction platforms. Susan Sherman, who lost her childhood home in the Palisades Fire, characterized the betting as “crass and heartless.” The financial volatility of the markets does not account for the decade-long sacrifices made by residents to establish roots in their communities.

Comparison of Market Risks

As new wildfire seasons approach, the tension between decentralized prediction markets and public safety remains unresolved. Regulators and ethics boards continue to evaluate whether these platforms require stricter oversight to prevent the exploitation of natural disasters.