The Pentagon has prohibited military and civilian personnel from using nonpublic information to trade on prediction markets, explicitly naming Polymarket and Kalshi. Defense Secretary Pete Hegseth issued the directive on October 20, addressing it to senior Pentagon leaders and combatant commanders. The order covers both classified and unclassified information, and violations can carry disciplinary or criminal penalties. The directive arrives as prediction markets have become an increasingly visible part of U.S. financial life, drawing growing scrutiny from regulators and lawmakers over how platforms handle potentially informed trading.

A Ban on Trading With Nonpublic Military Information

Hegseth's memorandum bars all department personnel, military and civilian alike, from using information unavailable to the public for financial transactions. The restriction applies to trades placed directly or through another person, and it reaches beyond prediction markets: traditional betting platforms and other financial markets fall under the same rule whenever personnel act on privileged knowledge. Polymarket and Kalshi operate event-contract markets where users wager on real-world outcomes, a segment overseen in the United States by the Commodity Futures Trading Commission. The directive does not prohibit every lawful trade by service members, but it bars transactions grounded in nonpublic information.

Hegseth bars US forces from using undisclosed information to bet on Polymarket, Kalshi — The Hill (@thehill) October 22, 2026
https://x.com/thehill/status/2113373782685446538?ref_src=twsrc%5Etfw

Intelligence Risks Cited in the Directive

Hegseth warned that foreign intelligence services could study trading patterns to identify potential U.S. military actions. “Our enemies watch movements in these markets,” he wrote, referring to financial activity around military outcomes. He said bets on operation dates or military results could reveal information about troop movements, targets, and timing. The memorandum further cautioned that financial positions could influence the judgment of military analysts and logistics personnel. In the Pentagon's framing, wagers placed on public markets create visible odds that anyone—including adversaries—can watch, turning market data itself into a potential security exposure. Violators may face administrative measures, military discipline, or criminal prosecution under federal law or the Uniform Code of Military Justice.

Insider Trading Case Fuels Scrutiny of Polymarket

The order follows an April enforcement case involving U.S. Army Sergeant Gannon Ken Van Dyke, which drew widespread attention to insider-trading risks on prediction markets. Federal authorities accused him of using classified details about the operation to capture Venezuelan leader Nicolás Maduro. According to the Commodity Futures Trading Commission (CFTC), his alleged Polymarket trades generated more than $404,000 in profits.

Prosecutors said he placed about $33,000 in wagers before the January military operation became public. Van Dyke pleaded not guilty to the charges, and the allegations remain subject to court proceedings. The CFTC separately filed a civil complaint concerning his alleged misuse of government information.

Questions about advance knowledge have extended beyond that case. Bets placed before U.S. strikes on Iran drew attention after six recently created Polymarket wallets reportedly earned nearly $1 million, prompting questions about the timing of their positions. Those transactions came under scrutiny, though available reports did not establish that the traders had classified information.

Congress Examines Prediction Market Insider Trading Controls

Congress has been examining how prediction platforms detect and stop trading based on confidential information. On May 22, House Oversight Chairman James Comer opened an investigation into Polymarket and Kalshi. The committee sought records about identity checks, suspicious trades, and the companies' methods for enforcing market rules. Its inquiries followed concerns that government officials could use restricted information to profit from contracts on public events.

Kalshi has faced separate questions about potential insider activity in political markets, including bets preceding a White House appointment. The platform confirmed an inquiry into those wagers, but no public finding had established wrongdoing in that case. Kalshi has introduced employment disclosures for some higher-risk markets, while its surveillance team reviews suspicious activity. Polymarket has also said it cooperated with investigators in the Van Dyke case.

Hegseth's October 20 directive now sets out a department-wide rule covering both military and civilian staff. It directs personnel to avoid using nonpublic information for personal gain, whether they trade themselves or act through other parties. With the Van Dyke prosecution pending, the CFTC's civil complaint unresolved, and the committee's records requests outstanding, identity checks, trade surveillance, and market rule enforcement remain the sector's central compliance questions.