Pentagon Bans Military Personnel from Using Nonpublic Information to Bet on Prediction Markets

Defense Secretary Pete Hegseth issued a memo on October 20 prohibiting all Department of Defense personnel from using nonpublic information to place bets on prediction markets, warning that such activity could hand enemy nations actionable intelligence about American military operations.

The memo, published by CBS News on October 23, was addressed to senior Pentagon leadership, Combatant Command leaders, and Defense Department field activity directors. Its subject line read: "Do Not Compromise Military Operations for Personal Financial Gain."

"Our enemies watch movements in these markets," Hegseth wrote. "When an American Service member, intelligence professional, or other Department civilian engages in a financial transaction on a military outcome, they create a signal. That signal can be aggregated, correlated, and exploited by hostile foreign intelligence services to anticipate our movements, targets, and timing."

The prohibition applies to "all financial platforms," including traditional betting services and prediction markets such as Polymarket and Kalshi, according to the memo. The ban covers transactions made directly or through a third party and extends to both classified and unclassified nonpublic information. Violations, Hegseth wrote, may result in administrative, disciplinary, or criminal action under the Uniform Code of Military Justice and applicable federal law.

Hegseth also raised concerns about the effect of financial incentives on professional judgment. "A logistician with money riding on a strike date has an interest in that date," he wrote. "An analyst with a position on an outcome has an interest in that outcome."

The memo follows a series of high-profile incidents that drew scrutiny to the intersection of insider knowledge and prediction market activity. In April, a U.S. Army soldier was arrested and charged with using confidential information to place $410,000 in bets on Polymarket related to the timing of a potential military capture of Venezuelan President Nicolás Maduro.

An August report by the Anti-Corruption Data Collective identified 152 suspicious wallets that placed longshot bets on military and defense markets, with those accounts collectively winning $8 million.

Separately, a group of new accounts on Polymarket placed highly specific, well-timed bets on whether the United States and Iran would reach a ceasefire shortly before President Donald Trump announced one in April, generating hundreds of thousands of dollars in profits. The White House issued an internal warning to staff against using private information to trade on prediction markets the same day that report emerged. In another reported case, a Trump teleprompter aide made $100,000 on Kalshi by betting on the content of the president's prepared remarks.

Both Kalshi and Polymarket maintain their own rules against insider trading, though those platform-level prohibitions carry considerably lighter consequences than federal criminal prosecution.

The memo arrives as prediction markets have expanded rapidly under the Trump administration's relatively permissive regulatory posture. The administration has also been pursuing legal action to block state governments from imposing their own restrictions on such platforms, arguing that the Commodity Futures Trading Commission holds exclusive jurisdiction. Courts have not reached a uniform conclusion, and several state governments are seeking Supreme Court review of the question.

The Hegseth memo represents the most direct and formal military-branch response to the pattern of insider-adjacent activity that has accumulated across multiple incidents. How aggressively the Department of Defense will pursue enforcement — and whether Congress will move to codify the restrictions — remains to be seen.

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