Defense Secretary Pete Hegseth Bans Troops From Using Military Secrets to Profit From Prediction Markets

Defense Secretary Pete Hegseth has issued a Pentagon-wide directive prohibiting American military personnel and civilian defense employees from using nonpublic government information to place bets on military operations, warning that the practice could compromise national security and put American troops in danger.

The order, dated October 20, specifically addresses the growing use of prediction markets such as Polymarket and Kalshi, where participants can wager on the outcomes of major political, economic and military events.

Hegseth made clear that individuals entrusted with sensitive military information cannot exploit that knowledge for personal financial gain, regardless of whether the information is formally classified.

The directive applies to service members, intelligence professionals and civilian employees throughout the Department of Defense. Violations could result in administrative punishment, military disciplinary proceedings or criminal prosecution under federal law.

The move comes months after federal authorities charged an American Special Forces soldier with allegedly using classified information about the operation to capture Venezuelan leader Nicolás Maduro to make more than $400,000 through prediction-market bets.

In his memorandum to senior Pentagon officials and military commanders, Hegseth emphasized that the consequences of such activity extend far beyond improper financial transactions.

“Make no mistake why this matters. Our enemies watch movements in these markets,” Hegseth wrote.

The defense secretary explained that when military personnel place wagers involving future operations, their transactions can provide valuable intelligence to foreign adversaries attempting to anticipate American military movements.

A sudden increase in bets involving a particular country, military target or potential strike date could reveal information that hostile intelligence services would otherwise struggle to obtain.

Even when an individual transaction appears insignificant, Hegseth warned that multiple trades can be analyzed together to identify patterns.

Foreign governments could potentially use those patterns to predict the timing of American military operations, placing service members at greater risk.

The directive also addresses the possibility that financial incentives could influence military decision-making.

“Beyond operational security, financial stakes can warp judgment,” Hegseth wrote.

He pointed to the potential conflicts created when military planners, intelligence analysts or logistics personnel have personal money riding on the outcome of an operation.

An individual who profits from a particular strike date or military outcome could develop a financial interest that conflicts with professional responsibilities.

Hegseth described that possibility as incompatible with the standards expected of American military personnel.

The defense secretary tied the restrictions to the Trump administration’s broader effort to strengthen discipline, accountability and operational readiness throughout the armed forces.

He emphasized that service members must remain focused on their responsibilities rather than opportunities to profit from privileged government information.

The Pentagon’s warning follows the prosecution of Army Master Sgt. Gannon Ken Van Dyke, a 38-year-old Special Forces soldier accused of exploiting advance knowledge of the January operation that resulted in Maduro’s capture.

Federal prosecutors allege that Van Dyke participated in planning and executing the mission before placing a series of wagers predicting American military action in Venezuela.

According to court documents, he placed bets totaling more than $32,500 between December 30 and January 2.

Most of those transactions allegedly occurred shortly before American forces launched the operation on January 3.

Prosecutors say Van Dyke subsequently collected more than $400,000 in profits from his successful predictions.

The government alleges that he used classified information obtained through his military position to make the wagers, rather than relying on publicly available information.

Van Dyke has pleaded not guilty to the charges against him, which include allegations involving wire fraud, commodities fraud and misuse of confidential government information.

The case has attracted attention because of the potential national security implications of allowing individuals with advance knowledge of military operations to participate in markets that reward accurate predictions.

The Pentagon’s latest directive seeks to prevent similar situations by explicitly addressing the use of nonpublic information in financial transactions.

The prohibition covers both classified intelligence and information that has not been formally classified but remains unavailable to the general public.

That distinction is important because military personnel may learn sensitive details through their official duties that do not carry a formal classification marking.

For example, knowledge of troop movements, operational schedules or logistical preparations could provide a significant advantage when betting on future military developments.

The new restrictions also extend beyond direct transactions by military personnel, addressing efforts to use third parties to place wagers.

The Pentagon has warned that indirect financial arrangements do not eliminate the risks associated with exploiting sensitive government information.

Prediction markets have expanded rapidly in recent years, allowing participants to trade contracts tied to outcomes ranging from elections and sporting events to international conflicts.

Platforms such as Polymarket and Kalshi have attracted substantial attention because their prices can reflect participants’ expectations about future events.

Unlike traditional opinion surveys, these markets involve financial transactions in which participants can profit when their predictions prove accurate.

That structure has raised questions about whether individuals with privileged information can gain unfair advantages over other participants.

The concerns become especially serious when the underlying events involve military operations, intelligence activities or sensitive diplomatic negotiations.

A report published in August by the nonprofit Anti-Corruption Data Collective identified more than 150 accounts suspected of trading on inside information related to military events.

Reuters also reported that Polymarket had referred dozens of potentially suspicious military-related transactions to the Justice Department.

Those findings added to concerns that some individuals may be attempting to exploit confidential government information through online prediction markets.

The issue is not limited to the United States.

Israeli authorities have also investigated allegations involving a military reservist and a civilian accused of using classified information to place wagers connected to Israeli military strikes against Iran.

The cases demonstrate how prediction markets can create financial incentives for individuals who possess advance knowledge of military decisions.

American officials have also examined suspicious transactions involving diplomatic developments.

In April, newly created Polymarket accounts reportedly placed unusually specific bets on whether the United States and Iran would reach a ceasefire shortly before President Trump publicly announced an agreement.

The transactions reportedly generated hundreds of thousands of dollars in profits, prompting questions about whether participants had access to information unavailable to ordinary traders.

The existence of well-timed bets does not independently establish illegal insider trading, but the activity has increased scrutiny of prediction markets involving government decisions.

The White House subsequently warned staff members against using private information obtained through their official positions to make financial transactions.

The Pentagon’s directive now establishes an explicit warning for military personnel and civilian defense employees.

Federal ethics rules already restrict government employees from exploiting nonpublic information for personal financial benefit.

Hegseth’s memorandum reinforces those obligations while specifically addressing prediction markets and the unique security concerns associated with military operations.

The directive does not amount to a blanket prohibition on every form of lawful betting by military personnel. Its central restriction concerns the use of privileged government information to profit from financial transactions.

The Pentagon has not publicly announced how many service members may currently be under investigation for suspected prediction-market misconduct.

It also remains unclear whether additional prosecutions will follow the Van Dyke case.

The defense secretary’s memorandum makes clear, however, that the administration considers the misuse of military information a matter of both professional discipline and national security.

Hegseth has repeatedly emphasized restoring military standards and ensuring that personnel remain focused on their missions.

His latest directive places financial conduct within that broader effort, warning that personal profit must never take precedence over operational security.

For American service members deployed in dangerous environments, the consequences of leaked operational information could be severe.

A transaction intended to generate a financial payout could potentially alert adversaries to an approaching operation, giving enemy forces time to prepare or respond.

The Pentagon is now reinforcing the expectation that individuals entrusted with sensitive information must protect it, whether or not it is formally classified.

As prediction markets continue expanding, the administration’s restrictions establish clear consequences for defense personnel who attempt to turn advance knowledge of military operations into personal financial gain.