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Apparently there has been 'documented 339 cases of lithium and lithium-ion batteries for portable electronics overheating, emitting smoke and fumes or exploding since 2003'. On top of that, the FAA has documented 60 incidents since 1991.

If you ask me, I'd rather have that happen in the cabin where a fire extinguisher could quickly be brought to bear upon the problem, instead of in the hold where it could burn out of control.

In the confines of an aircraft, neither are a good situation. The upholstery of an aircraft is still ridiculously flammable, even though it is supposedly 'fire retardant'. I'd have to check, but I believe most holds have an automatic fire suppression system. On top of that, the entire hold is not pressurized, only certain areas are. There is a lot less oxygen in the non-pressurized parts for a fire to catch/spread.

On top of the technical reasons, there are also the 'personal' types of reasons. The panic a fire causes on an aircraft is amazing. You have a closed area, with no way out, generally with a lot of people, and fill that cabin with smoke, possibly flames, and mayhem wouldn't begin to describe the scene.