Hegseth bars Pentagon staff from betting with non-public information

Defense Secretary Pete Hegseth issued a memorandum dated October 20 that prohibits Department military and civilian personnel from using non-public information, classified or not, to operate on betting platforms and prediction markets, explicitly naming Polymarket and Kalshi. The text warned that violations "may result in administrative, disciplinary and, where appropriate, criminal action under the Uniform Code of Military Justice and/or applicable federal law," and was first reported by CBS News.

What the memorandum orders

The memorandum was addressed to Pentagon leaders, combatant commanders and directors of the Department's field agencies and activities. "This prohibition applies whether the transaction is informed by classified or unclassified information," Hegseth wrote, according to the quote reproduced by DefenseScoop. The document has not been published in full; the phrases quoted here come from media outlets that cited passages of the text.

Hegseth added an operational rationale in the same quoted passage: "Our enemies watch movements in these markets." The note also includes: a transaction on a military outcome creates "a signal" that "can be aggregated, correlated, and exploited by hostile foreign intelligence services to anticipate our movements, targets, and timing." The memorandum also advances the conflict-of-interest argument: "A logistician with money riding on a strike date has an interest in that date."

Immediate background: the Van Dyke case

The memorandum follows federal charges made public on April 23 against Master Sergeant Gannon Ken Van Dyke. The Department of Justice unveiled an indictment charging Van Dyke, an active-duty service member at Fort Bragg, with unlawful use of government confidential information, theft of non-public government information, commodities fraud, wire fraud and an illicit monetary transaction.

Prosecutors allege Van Dyke participated in planning the operation called Operation Absolute Resolve, the January 3 capture of Nicolás Maduro, and that he placed around 13 bets totaling approximately $33,000, realizing gains of about $409,881 on Polymarket. Van Dyke has pleaded not guilty.

The Commodity Futures Trading Commission filed a parallel civil complaint and described the case as its first use-of-insider-information matter in event contracts. The CFTC's enforcement division had already issued a notice on February 25 stating that trading event contracts with misappropriated confidential information can constitute insider trading under the Commodity Exchange Act, and that exchanges must maintain their own surveillance systems.

Legislative and administrative reaction

In a May 1 letter, 16 House members led by Representative Eugene Vindman asked Hegseth for "a general order or rule to prohibit all military and civilian personnel from using prediction markets to bet on any matter related to national security." The House Armed Services Committee's draft defense bill would include rules to bar trading by those who have, or "could reasonably obtain," non-public information, CNN reported in June.

The Senate version would include a provision, Section 1081, requiring covered transactions above $250 to be reported to an ethics officer. The Project On Government Oversight (POGO) said on September 29 that that threshold "leaves room for insider use" and called for a total ban on prediction-market transactions within the Department.

On April 30 the Senate had already banned its members and staff from betting in prediction markets; the White House warned staff about trading on private information the same day the AP reported closely timed Polymarket bets on a U.S.–Iran ceasefire.

What the memorandum changes from the prior legal framework

Using classified information to trade was already prosecutable and is the basis for the indictment against Van Dyke. The memorandum does not create new crimes, but it gives commanders an administrative path to punish and clarifies that the prohibition also covers non-classified but non-public information. That extension matters because criminal and civil processes are slow and sparse: by August the CFTC had filed charges against only three prediction-market operators while pursuing up to 20 investigations stemming from Kalshi referrals, according to The New York Times.

Command disciplinary authority allows measures without waiting for criminal charges. The memorandum therefore turns an existing prohibition into a tool that can be applied administratively within the chain of command.

Implications for platforms and markets

Exchanges and platforms have already begun adjusting their rules. Polymarket published strengthened rules on March 23 that prohibit trading with stolen confidential information, illegal tips and by people who can influence an outcome. Kalshi, for its part, fined and suspended three congressional candidates it said had placed bets on their own races, according to the AP. Platforms' rule changes and enforcement interact with [regulatory proposals](/regulation) and platform risk management described in industry discussion of [b2b](/b2b) market integrity.

The CFTC proposed on June 10 to evaluate contracts involving war, terrorism and assassination on a case-by-case basis against public-interest factors. Each well-timed bet adds pressure for event markets to be reviewed or removed; the May 1 letter from the group of lawmakers cited specific Polymarket markets on Kharg Island and the rescue of aviators in Iran.

Current status and next steps

CBS News reported the memorandum on October 22; the quoted text also appeared in DefenseScoop and the Associated Press. The Department has not published the full memo nor indicated a formal notification or preauthorization requirement. The measure now depends on internal detection and on pending legislative changes in the defense bill that Congress has not yet finalized.

[Renata Quiroga, Corresponsal de mercados de apuestas]