Pentagon cracks down on insider betting – AP
US Secretary of War Pete Hegseth has issued a directive banning military personnel from using inside information to bet on prediction markets like Polymarket, warning such wagers could expose operations and distort judgment.
The memo, dated Tuesday and reviewed by the Associated Press, specifically targets platforms where users wager on real-world events including elections and military actions. Violators face disciplinary action or criminal charges under military or federal law.
Security concerns
Hegseth emphasized that prediction market movements create signals that adversaries could exploit. "Our enemies watch movements in these markets," he wrote, noting that financial transactions on military outcomes by service members or intelligence professionals create security risks.
When an American service member, intelligence professional, or other Department civilian engages in a financial transaction on a military outcome, they create a signal.
Recent scandals
The directive follows the prosecution of Master Sergeant Gannon Ken Van Dyke, who allegedly used advance knowledge of a planned operation to kidnap Venezuelan President Nicolas Maduro to place over $32,500 in Polymarket bets, earning more than $400,000.
Most wagers were reportedly placed on January 2, hours before the attack on Caracas. Van Dyke has pleaded not guilty to the charges.
Broader implications
The controversy extends beyond military circles. Suspiciously timed bets on Polymarket preceded Trump's April announcement of a US-Iran ceasefire, generating hundreds of thousands in profits. The White House subsequently warned staff against trading on confidential information.
The Trump administration has argued prediction markets should remain under federal financial regulation rather than state gambling laws, despite several states accusing them of sidestepping consumer protections. Donald Trump Jr. serves as a strategic adviser to Kalshi and holds investments in Polymarket through his venture firm.
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