Pentagon Restricts Prediction Market Bets
Defense Secretary Pete Hegseth has directed U.S. military personnel and Pentagon employees not to use nonpublic information to make prediction market wagers involving military outcomes. The order names Polymarket and Kalshi and frames such trading as a potential operational security risk rather than merely a financial conduct issue.
What happened
Hegseth issued the directive to senior Pentagon leadership and combatant commanders, according to Cbsnews. It prohibits Defense Department personnel from using both classified and unclassified nonpublic information to place financial wagers on U.S. military operations.
DefenseScoop reported that the memorandum, as of Oct. 20, 2026, applies to Pentagon and military personnel placing wagers through services including Polymarket and Kalshi. The memo says violations may lead to administrative or disciplinary action and, where appropriate, criminal action under the Uniform Code of Military Justice or federal law.
The directive focuses on the information behind a trade, rather than announcing a general ban on prediction markets. Cbsnews reported that the policy is directed at wagers made with nonpublic information about military operations, movements, targets or timing.
According to Greenwichtime, which reported on the memorandum reviewed by The Associated Press, Hegseth warned that adversaries monitor activity in these markets. The memo argues that a financial transaction tied to a military outcome can create a signal for outside observers, even when an individual trade appears limited in scale.
Bitcoin.com News reported that Hegseth warned bets connected to military operations could expose sensitive intelligence to American adversaries and endanger troops. The policy therefore treats prediction market activity as a possible channel through which operational knowledge could become visible indirectly.
Why it matters
Prediction markets turn views about real-world events into tradable positions. In the military context, a wager by someone with advance knowledge can do more than create a possible insider trading concern. It can communicate that informed participants believe a particular event is likely, potentially adding weight to public speculation around an operation.
Cbsnews reported that Hegseth specifically warned foreign intelligence services could analyze betting patterns to anticipate American military movements, targets and the timing of an operation. The concern is not limited to the public description of a market question. It also includes the timing, direction and concentration of financial activity around a possible military event.
The memorandum places prediction market conduct within existing military and federal accountability frameworks. DefenseScoop reported that the policy identifies potential administrative, disciplinary and criminal consequences, depending on the circumstances. That language underscores that the Pentagon views the misuse of nonpublic information as a broader security matter.
The order also explicitly identifies Polymarket and Kalshi, according to Cbsnews and DefenseScoop. Naming the platforms makes clear that the guidance addresses prediction markets directly, rather than relying on more general restrictions concerning gambling, financial transactions or disclosure of sensitive information.
Background and context
The issue gained heightened attention following a U.S. operation that captured Venezuelan leader Nicolás Maduro, as of Jan. 3, 2026. SRN News, citing an Associated Press report, said Gannon Ken Van Dyke, 38, was charged with using classified information connected to that operation to win more than $404,000 on Polymarket and more than $5,000 on three other Venezuela-related contracts.
SRN News reported that prosecutors and the Commodity Futures Trading Commission alleged Van Dyke moved $35,000 to a crypto exchange and used more than $32,500 for bets in the days before the Caracas raid. Greenwichtime described the case as involving a Special Forces soldier accused of using classified information to win more than $400,000 on Polymarket. The reported profit figure has varied across accounts, with sources describing it as more than $400,000 or more than $404,000.
Reports of more than 150 wallets trading on suspected military insider information, along with Polymarket referrals of dozens of cases to the Justice Department, put additional focus on how advance knowledge could affect these markets. The public attention has centered on whether market activity can reveal operational information before an event becomes public.
The concern has not been confined to the United States. Cointelegraph reported that Israeli authorities arrested and indicted a military reservist and a civilian in February in connection with allegations that classified information was used for Polymarket bets related to Israeli strikes on Iran.
Together, these cases illustrate why officials may distinguish ordinary public speculation from trades made using information unavailable to the market at large. The Pentagon directive is a formal statement of that distinction for its personnel and civilian workforce.
What to watch
Key questions include how the Defense Department will communicate the rule across military commands, intelligence roles and civilian offices, and how it will identify trades that may have relied on nonpublic information.
It will also be important to see how any administrative, military justice or federal enforcement actions are described when suspected violations arise. The memorandum allows for different consequences depending on the conduct, according to DefenseScoop.
Another open question is how prediction market operators handle referrals and cooperate with authorities when trading patterns raise concerns about access to military or other sensitive government information. Polymarket’s reported referrals to the Justice Department have already made that issue part of the broader debate.
