Key Takeaways
Pentagon personnel are prohibited from using classified or unclassified nonpublic information to trade on Polymarket, Kalshi and other financial platforms.The directive follows charges against a Special Forces soldier accused of profiting from bets on the U.S. operation to capture Nicolás Maduro.Hegseth warned that suspicious betting activity could expose military operations to adversaries, with violators facing disciplinary or criminal action.
Military Makes Insider Trading Ban Official
The directive follows the prosecution of a Special Forces soldier accused of making more than $400,000 on Polymarket by betting on a mission to capture Venezuelan President Nicolás Maduro.
In an Oct. 20 memorandum titled “Do Not Compromise Military Operations for Personal Financial Gain,” Hegseth declared that all Department of Defense personnel are barred from conducting financial transactions using nonpublic information, whether directly or through third parties.
The prohibition covers both classified and unclassified information and explicitly names prediction market platforms Polymarket and Kalshi, alongside traditional betting services and other financial platforms.
Violators could face administrative penalties, disciplinary proceedings or criminal prosecution under the Uniform Code of Military Justice and applicable federal law.
“Make no mistake why this matters. Our enemies watch movements in these markets,” Hegseth wrote in the memo obtained by CBS News.
The defense secretary warned that wagers placed by service members, intelligence professionals, or civilian employees could generate trading signals that foreign intelligence agencies might analyze to anticipate U.S. military movements, targets, and operational timing.
He also argued that financial interests could compromise military decision-making, pointing to the potential conflicts created when logistics personnel or intelligence analysts have money riding on particular military outcomes.
Prominent Alleged Polymarket Misdeeds
The directive arrives months after a high-profile prosecution illustrated those concerns.
In April, U.S. Army Master Sergeant Gannon Ken Van Dyke, a 38-year-old Special Forces soldier, pleaded not guilty to five federal charges stemming from allegations that he exploited confidential military information to profit from Polymarket wagers.
As Bitcoin.com News previously reported, prosecutors allege that Van Dyke placed approximately $33,000 in bets between December 27 and January 2, predicting that Maduro would be removed from power and that U.S. forces would enter Venezuela.
The wagers allegedly generated more than $404,000 when U.S. forces captured Maduro during Operation Absolute Resolve on January 3.
Van Dyke faces charges including commodities fraud, wire fraud, unlawful use of confidential government information, theft of nonpublic government information, and conducting an unlawful monetary transaction. The Commodity Futures Trading Commission also filed a parallel civil enforcement action.
The case marked the CFTC’s first insider-trading enforcement action involving event contracts and its first use of the so-called “Eddie Murphy Rule,” a provision of the Commodity Exchange Act restricting government employees from exploiting nonpublic information in regulated markets.
As previously reported by Bitcoin.com News, Polymarket said it flagged Van Dyke’s trading to authorities and cooperated with investigators, while rival Kalshi had previously prevented him from opening an account under its identity verification requirements.
Hegseth’s memorandum does not prohibit military personnel from participating in prediction markets altogether. Rather, it establishes an explicit department-wide restriction against exploiting nonpublic information for financial gain, extending beyond markets involving military operations.
The defense secretary framed the issue as both a national security threat and a matter of military ethics.
“Nothing should distract us from that sacred mission,” Hegseth wrote. “Not entertainment. Not a payout.”
The directive adds to growing scrutiny of prediction markets, where contracts tied to geopolitical developments, elections, and military operations have raised questions about the ability of participants with privileged information to profit from events before they become public knowledge.
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