being pedantic here but

> You aren't allowed to set up a life insurance policy on someone else's life, or a fire insurance policy on someone else's home

This isn't really true. Lots of people take out life insurance on others as a hedge for many reasons, small business partner is one. Same fire insurance, we had a case where someone pledged a building as collateral and we took out separate fire insurance on the building so we'd get paid out immediately.

I'm not sure where this false premise started but alot of people believe it.

Well, you are privately allowed to bet on whatever you like with another individual. That is indeed legally fine, though potentially distasteful.

Polymarket is facilitating bets between people, not bets with the house. Gambling and insurance are both bets with the house.

Remember how things ended up when insurance policies on loans you didn't hold were allowed... I think there is quite a lot of good reasons to ban those sort of bets.

> But buying an event contract that pays if someone dies or someone's house burns down is fine?

You can sell your life insurance policy to somebody else. It's a way of getting money to sick people to use while thy are still alive.

Murder and arson are illegal. Just because there is an event contract that doesn't make them legal to do.