The Pentagon prediction markets ban is now in effect, with Defense Secretary Pete Hegseth directing service members not to use nonpublic information to place wagers on platforms such as Polymarket and Kalshi.
In a memo dated Tuesday, Hegseth warned that adversaries monitor pricing and activity on prediction markets, and that a service member trading on a military outcome can create a signal. He said the policy covers both classified material and unclassified but nonpublic information, and violators could face administrative action or criminal charges under the Uniform Code of Military Justice or federal law.
Hegseth also cautioned that financial incentives can distort decision-making. He wrote that a logistician with money on a strike date has an interest in that timing, and an analyst with a position on an outcome has an interest in that outcome.
The directive follows high-profile cases involving alleged misuse of insider information. Earlier this year, a U.S. Special Forces master sergeant involved in the operation to capture then-Venezuelan President Nicolás Maduro was charged with using classified details to win more than $400,000 on Polymarket. Prosecutors say he placed a series of bets totaling more than $32,500 on when Maduro might be removed from power, most of them on the night of Jan. 2, just hours before missiles struck Caracas.
The practice of leveraging government access for wagers has drawn scrutiny beyond the Defense Department. A cluster of new Polymarket accounts placed highly specific, well-timed bets on a potential U.S.-Iran ceasefire shortly before President Donald Trump announced it in April, generating hundreds of thousands of dollars in profits for the new customers.
The White House the same day warned staff not to use private information to trade on prediction markets.
Separately, Kalshi fined and suspended three congressional candidates in April after determining they bet on the outcomes of their own elections.
Pentagon prediction markets ban aims to protect operations
A defense official said there was no additional information to share beyond the memo. The policy underscores concerns about operational security and the risk that market signals tied to military events could be observed by foreign actors.
The Justice Department has also focused on the integrity of elections and federal processes, including a recent Justice Department California review ordered on possible noncitizen ballots. Together, these moves reflect broader anxieties about how private information and public power can intersect with markets and political outcomes.
Prediction markets such as Kalshi have sought to expand their offerings while navigating regulatory scrutiny. The Pentagon’s memo adds a new layer of restrictions for those with access to sensitive national security information.
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