Hegseth Bars Troops and Pentagon Staff From Trading on Nonpublic Information, Naming Polymarket and Kalshi

A one-page memo from Defense Secretary Pete Hegseth tells service members and civilians that trading on nonpublic information, classified or not, can bring discipline or prosecution, and calls their bets a signal enemies can read. As reported, it stops short of the ban on military-event trading that lawmakers asked for in May.

• Defense Secretary Pete Hegseth has barred personnel from using nonpublic information, classified or unclassified, to trade on betting platforms and prediction markets, naming Polymarket and Kalshi, in a memo dated 20 October first reported by CBS News
• Violations may bring administrative, disciplinary and, where appropriate, criminal action under the Uniform Code of Military Justice or federal law, according to the text quoted by DefenseScoop
• Hegseth argues that a trade on a military outcome creates "a signal" that hostile intelligence services can exploit to anticipate US movements, targets and timing
• It follows the April charges against Master Sgt. Gannon Ken Van Dyke, accused of making about $409,881 on Polymarket from classified information about the Maduro raid, a case in which prosecutors argue the contracts are swaps; he has pleaded not guilty
• Congress wants more: 16 House members asked in May for a ban on betting on any national security topic, and both chambers' defence bills carry prediction market provisions

The Pentagon Puts a Written Order Behind an Existing Prohibition

Defense Secretary Pete Hegseth issued a memorandum dated Tuesday 20 October prohibiting military and civilian personnel from using nonpublic government information to place financial wagers, "including traditional betting platforms and prediction markets such as 'Polymarket' or 'Kalshi'", according to the text quoted by DefenseScoop. It was addressed to Pentagon leadership, combatant commanders, and the directors of Defense agencies and field activities. CBS News first reported it on 22 October. The memo, one page according to the Associated Press, has not been published, so the passages here are those quoted by these outlets.

"This prohibition applies whether the transaction is informed by classified or unclassified information," Hegseth wrote, according to DefenseScoop. "Violations may result in administrative, disciplinary, and, where appropriate, criminal action under the Uniform Code of Military Justice and/or applicable federal law." None of the reporting identifies a specific statute the memo cites, and none describes a reporting or pre-clearance requirement.

"Our enemies watch movements in these markets," Hegseth wrote. A transaction on a military outcome creates "a signal", which, in the text quoted by The Epoch Times, "can be aggregated, correlated, and exploited by hostile foreign intelligence services to anticipate our movements, targets, and timing." He added an argument about judgment: "A logistician with money riding on a strike date has an interest in that date."

CBS News, the AP and DefenseScoop write "Defense Department"; the administration also uses "Department of War", the secondary title authorised by Executive Order 14347 of 5 September 2025, which leaves the statutory name in force until Congress changes it. In the passages quoted, the memo says only "the Department".

The Case That Prompted It

On 23 April the Justice Department unsealed an indictment charging Van Dyke, an active-duty soldier at Fort Bragg, with unlawful use of confidential government information, theft of nonpublic government information, commodities fraud, wire fraud and an unlawful monetary transaction. Prosecutors allege he helped plan Operation Absolute Resolve, the 3 January capture of Nicolás Maduro, and placed about 13 bets totalling about $33,000, profiting about $409,881. The Commodity Futures Trading Commission (CFTC) filed a parallel civil complaint, calling it its first insider trading case involving event contracts. Van Dyke has pleaded not guilty.

The CFTC's enforcement division had set out its position in a 25 February advisory: trading event contracts on confidential information misappropriated in breach of a duty of trust can be insider trading under the Commodity Exchange Act, and exchanges must run their own surveillance. Polymarket published rules on 23 March barring trading on stolen confidential information, on illegal tips, and by anyone able to influence an outcome. Kalshi fined and suspended three congressional candidates who it said wagered on their own elections, the AP reported.

The White House warned staff against trading on private information on the day the AP reported well-timed Polymarket bets on an April US-Iran ceasefire, and the Senate barred its members and staff from prediction markets on 30 April. Polymarket has referred dozens of its own traders to the Justice Department.

Congress Asked for a Broader Rule

On 1 May, 16 House members led by Rep. Eugene Vindman urged Hegseth to issue "a general order or regulation to prohibit all military and civilian personnel from utilizing prediction markets to place bets on any national security related topic". The House Armed Services Committee's draft defence bill would require regulations barring trading by personnel who hold, or "may reasonably obtain", nonpublic information, CNN reported in June. In the Senate version, Section 1081 would require covered transactions above $250 to be reported to an ethics official; the Project On Government Oversight (POGO) said on 29 September that this "leaves room for insider trading" and urged a ban on all prediction market trading within the Department.

The Memo Restates the Law, and Adds the Chain of Command

Using classified information to trade was already prosecutable, which is how Van Dyke came to be charged. What the memo changes is who can act: it gives commanders their own route to discipline and extends the rule plainly to unclassified but nonpublic information. That matters because criminal and civil cases are slow and few: by August the CFTC had charged only three prediction market traders while pursuing as many as 20 investigations from Kalshi referrals alone, according to the New York Times. Administrative action does not have to wait for an indictment.

Hegseth's Own Argument Reaches Further Than His Rule

The prohibition, as quoted, turns on the use of nonpublic information. Its reasoning does not. A logistician with money on a strike date has a conflict of interest whether or not he can be shown to have used inside knowledge, and a cluster of trades by service members carries a signal whatever each of them knew. That is the case the 16 lawmakers and POGO made for banning such trading outright. A rule that depends on proving what a trader knew leaves the hardest step, establishing intent behind a pseudonymous account, where it was.

The Commercial Exposure Is the Military Markets Themselves

For the exchanges, a ban on insider trading by personnel is easy to support; their rulebooks say the same. The harder question is whether contracts on military operations should be listed at all. The 1 May letter appended Polymarket markets on Kharg Island and on the rescue of aviators downed over Iran, and the CFTC's 10 June proposal would assess contracts involving war, terrorism and assassination one by one against public interest factors. Each well-timed bet makes those contracts harder to defend, a larger risk to the category than any single prosecution, including the reported KPMG case built on earnings markets.

The memo gives the Pentagon a disciplinary tool it lacked and a public position it had avoided. Whether it is enough depends on detection, and on a defence bill Congress has not yet finished.