Pentagon prediction market ban targets troops using nonpublic info

A Pentagon prediction market ban is now official policy. Defense Secretary Pete Hegseth signed a memo dated Oct. 20 that bars Defense Department personnel from using nonpublic government information to place financial bets, including on "prediction markets such as 'Polymarket' or 'Kalshi'," according to copies obtained by CBS News and DefenseScoop and reported on Thursday, Oct. 22.

What happened

The memo went to senior Pentagon leaders, combatant commanders and the heads of defense agencies and field activities. "This prohibition applies whether the transaction is informed by classified or unclassified information," Hegseth wrote. FEDweek noted that it covers "all financial platforms," which could reach crypto exchanges and other workarounds, not just the two named sites.

Penalties can be serious. Violations "may result in administrative, disciplinary, and, where appropriate, criminal action under the Uniform Code of Military Justice and/or applicable federal law," the memo says.

Hegseth framed the rule as operational security. "Make no mistake why this matters. Our enemies watch movements in these markets," he wrote, warning that a bet by a service member, intelligence professional or civilian "can be aggregated, correlated, and exploited by hostile foreign intelligence services to anticipate our movements, targets, and timing."

Why it matters

He also made an ethics argument. "A logistician with money riding on a strike date has an interest in that date," the memo says, calling such stakes a "dilution of the warrior ethos."

The directive follows a run of cases. In April, the Justice Department charged Army Master Sgt. Gannon Ken Van Dyke with using inside knowledge of the operation that captured Venezuela's Nicolas Maduro to bet on Polymarket. Investigators say he wagered more than $33,000 and won more than $409,000, CBS reported. He has pleaded not guilty, DefenseScoop said.

In August, CNN reported that more than 150 Polymarket wallets may have traded on military insider information, citing research by the Anti-Corruption Data Collective, and Reuters reported that Polymarket had referred dozens of possible cases to the Justice Department, according to DefenseScoop. Lawmakers have pressed the same issue, as in our House Oversight insider trading letters story, and exchanges have opened their own probes, as with Kalshi's press secretary bets inquiry.

What's next

The Pentagon prediction market ban does not stop the public from trading on war, strikes or ceasefires, and it adds no new duty for the platforms themselves. It does give commanders a clear rule and a clear path to prosecution, which may matter for future cases built on blockchain records. The memo was first reported by CBS News.

Enforcement will still be hard. Prediction market accounts are often pseudonymous, especially on crypto-based platforms, and investigators have relied on timing patterns and blockchain tracing to link wallets to people. The memo does not set up a reporting system or require personnel to disclose existing positions, according to the reports, so much will depend on how commands apply it.

Military and geopolitical contracts are among the busiest on these sites, and trades by insiders can move prices before news breaks. Polymarket has said the Van Dyke arrest shows "the system works."

For the exchanges, the Pentagon prediction market ban arrives as they face state lawsuits, congressional letters and questions about political donations, all ahead of the Nov. 3 midterm elections.