But will likely accelerate them
Privately owned water is being extracted from a region and then sold. They have no incentive to sell water to those who need it to survive, except if they also accidentally make the owners more money.
One basic consequence is incredible human suffering and an extreme amount of power imbalance. Then, it is a matter of time and critical mass until things get ugly and violent.
FWIW I'm sympathetic to that position (in some form), it would just be better to be more precise... people are acting like "water is a basic human right" is a principle that can straightforwardly be used to derive the rest of our water policy.
It solidifies the notion of privately owned water sources in a general sense: That's too much "free market" for my taste and goes against my ethical disposition.
Secondly it doesn't solve any problems and challenges. The incentive here is to profit from making market predictions. No more, no less.
There are more balanced approaches to handle water distribution. Via public commissions and regulated use for example.
For many people, it allows them to get price stability. It means that, for the length of a growing season, they can have water at a known price and not be vulnerable to price swings.
IMO, that does address a real challenge or problem faced by real people. Especially in agricultural places where water markets already exist, like California.
I think you're right, though. There must be a better way to handle this. I'd love to hear about realistic ways to reform California's water rights system!
In fact futures contracts could in theory even take away a little of the power they have since, in effect, they won't be able to raise water prices on you over night, but you can have a 3-6 month warning that a price rise is coming and can plan accordingly.