The U.S. Department of Defense has barred military personnel, intelligence professionals and civilian employees from using classified or other nonpublic government information for prediction-market wagers. The October 20 directive explicitly names platforms including Kalshi and Polymarket while framing insider trading as both a national-security and conflict-of-interest risk.
According to an Associated Press report on the Pentagon memorandum, Defense Secretary Pete Hegseth warned that trading tied to military outcomes can create observable signals that hostile intelligence services may analyze. The restriction applies to nonpublic information whether or not it is formally classified, extending the policy beyond conventional handling rules for national-security secrets.
The memorandum does not impose a blanket ban on every prediction-market trade by Defense Department personnel. Its central prohibition is the use of privileged government information for personal financial transactions, with violations potentially triggering administrative discipline, action under the Uniform Code of Military Justice or federal prosecution.
Soldier Case Turns Insider Trading Into an Operational Risk
The policy follows the April indictment of Army Master Sgt. Gannon Ken Van Dyke, who participated in planning Operation Absolute Resolve, the U.S. mission to capture Nicolás Maduro. According to the Justice Department’s criminal case announcement, prosecutors allege Van Dyke used classified knowledge about the operation to trade contracts tied to Maduro and U.S. military activity.
The CFTC separately alleges that Van Dyke purchased more than 436,000 “Yes” shares in a Polymarket contract concerning Maduro’s removal and generated more than $404,000 in profits. The case became the CFTC’s first insider-trading enforcement action involving event contracts, although Van Dyke has not been convicted and the allegations remain subject to litigation.
The Pentagon’s concern goes beyond whether an individual trader earns money. A cluster of positions placed by people with access to the same operation could itself reveal information about timing, targets or confidence, even without any participant deliberately communicating classified material to an adversary.
That information problem resembles the broader market-integrity issues already emerging around prediction platforms. Kalshi has previously suspended a congressional candidate for trading contracts linked to her own election, illustrating how participants with direct influence or privileged knowledge can create risks that ordinary market surveillance must distinguish from legitimate forecasting activity.
Government Rules Tighten Around Prediction Markets
The Pentagon directive arrives after the Senate formally amended its rules in April to prohibit senators, officers and employees from participating in prediction markets. The Senate restriction is broader than the Defense Department policy because it bars covered Senate personnel from participating in such markets rather than only prohibiting trades based on nonpublic information.
The White House has also addressed insider trading directly. In March, staff received a warning against using nonpublic government information to place financial bets, while the CFTC has separately stated that misappropriating confidential information can violate existing anti-fraud rules governing event contracts.
That enforcement focus is increasingly visible in prediction-market regulation. Recent CFTC guidance on manipulation-sensitive event contracts emphasized that markets controlled or anticipated by insiders require heightened scrutiny, while Kalshi’s continuing regulatory disputes show that federal derivatives oversight is expanding alongside separate legal questions about market access and contract design.
The Pentagon’s directive therefore adds an operational-security layer to an already developing regulatory framework. Prediction-market prices can aggregate useful information, but that same information-discovery function becomes a security concern when traders possess advance knowledge of military decisions, making the identity and information advantages of market participants increasingly important to government oversight.
