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As the western U.S. is gripped by record-shattering wildfires, some unscrupulous people aren’t just contemplating what it will be like for future generations living in our new normal, or wondering whether climate change is making this situation worse (duh!). They’re thinking about how much money they can make. 

For better or worse, most people are now familiar with prediction market apps like Kalshi and Polymarket. These platforms allow people to bet on pretty much anything, whether it’s some boring sports thing, election results or perhaps even war crimes. The makers of these apps insist they are “future exchanges,” not digital gambling parlors, but regulators in places like Singapore, France, Belgium and elsewhere aren’t convinced and have banned the apps. Without wading into the semantics, critics are increasingly looking into the consequences of making almost everything wagerable.

On Aug. 3, Democratic senators from six states sent a letter to the chair of the Commodity Futures Trading Commission, the independent government arm that regulates Polymarket and Kalshi, warning that these apps are allowing bets on wildfires, which could incentivize arson. They highlight previous examples of bets placed on the January 2025 Palisades and Eaton fires, which razed large areas of Los Angeles County, killing 31 people and destroying more than 16,000 structures. 

“Offering bets on destructive wildfires threatens to minimize communities’ suffering all so the rich and powerful can profit,” the authors, who include Sens. Adam Schiff, D-Calif., and Amy Klobuchar, D-Minn., wrote. “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.”

This is a classic example of a perverse incentive, in which the structure of a system encourages undesirable results. The classic example is of dubious historical accuracy, but originates from the British occupation of India. Weary of venomous snake bites, British authorities put a bounty on dead cobras — but this only incentivized locals to breed more of the snakes, in order to collect even more reward money.

If you allow people to earn cash from dead snakes, you risk getting a lot more living snakes in the process. Honestly, one might observe that our entire economy is structured like a betting app strung together by incentive perverts. It’s why the market rewards the most amoral and destructive behavior, from hedge funds that short the market and destroy company value to vulture capitalists who gut businesses like Toys R Us or Radioshack and escape on their golden corporate parachutes. Even when all this results in a recession, the government is likely to bail big corporations out, while any form of assistance for the working class is branded as “socialism.” In fact, the entire stock market could be best described as a casino that incentivizes absurd growth like the historic tech bubble provoked by the spread of AI.

Mainstream economists may want you to believe that all this is driven by Darwinian forces that follow some natural law, simplified as “the cost of doing business” or Adam Smith’s invisible hand. But that’s pretty unscientific. Money itself is just a construct, one with rules dreamt up by humans. We don’t have to live in a world where people profit from tragedy, be it wildfires or housing foreclosures or weapons manufacturing. I’m willing to bet we can actually achieve such a utopian outcome, even if it takes another century. The alternative is to continue draining everything of value as it goes up in smoke. —Troy Farah

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