Pentagon Issues Directive Barring Troops from Prediction Market Betting with Sensitive Information
The Pentagon has issued a new directive prohibiting military personnel from placing bets on prediction markets using classified or sensitive information. This move is seen as a crucial step toward curbing such activities within the armed forces, though experts caution that robust enforcement will likely present a significant challenge.
Secretary of Defense Pete Hegseth issued the memo on October 20. This directive comes nearly six months after an Army Special Forces master sergeant was indicted for allegedly leveraging a prediction market to wager on events related to a mission to capture Venezuelan President Nicholas Maduro.
The memo explicitly states, “All Department of War personnel are prohibited from engaging in financial transactions using nonpublic information, either directly or indirectly through a third party.” It further clarifies that this prohibition extends to both classified and unclassified information, specifically naming platforms like Polymarket and Kalshi as examples.
According to legal experts, this directive from the highest Pentagon official establishes a clear and lawful order across all military branches. However, these same experts express concern that the memo does not go far enough to mandate specific training and information sessions for troops regarding these increasingly popular online platforms. Instead, they suggest, the directive largely relies on military members erring on the side of caution. Retired Army judge advocate general Victor Hansen summarized this approach as, “When in doubt, don’t do it.”
“The broadest intent here is to kind of put a shot over the bow to everybody and say, ‘You probably ought not to be involved in this prediction market stuff in the first place,'” Hansen stated.
A spokesperson for the Department of the Air Force informed Air & Space Forces Magazine that while officials do not discuss specific counterintelligence training, “leaders continually emphasize the expectation of all Airmen and Guardians to understand their responsibilities for protecting information and reporting potential violations.” The spokesperson urged Airmen and Guardians who suspect or witness colleagues using nonpublic information on these markets to report such incidents through established supervisory, command, inspector general, or law enforcement channels.
When asked about existing regulations or laws governing prediction market use for military personnel, a Pentagon official responded that “all Executive Branch personnel are prohibited from engaging in financial transactions using nonpublic information or allowing the improper use of nonpublic information to further their own private interests or those of another, whether through advice or recommendation, or by knowing unauthorized disclosure.” These restrictions, which cover Active, Guard, and Reserve personnel, are already enshrined in Pentagon ethics regulations, the spokesperson added.
The Rise of Prediction Markets
Prediction markets, though gaining significant public traction in recent years with reported trading volumes surpassing $44 billion in 2025, have roots extending back decades. Early iterations include exchanges like the Iowa Electronic Market and Idea Futures in the late 1980s and mid-1990s. More commercial and broadly accessible platforms such as TradeSports and InTrade garnered a niche online following in the early 2000s. The fundamental concept involves traders placing wagers on the future outcome of various events, ranging from weather patterns and sporting contests to complex geopolitical developments.
The launch of Polymarket in 2020 and Kalshi in 2021 significantly elevated prediction markets into the public consciousness. A multitude of competitors, including gambling companies and cryptocurrency exchanges, have since rushed to introduce their own event contract platforms. These companies have invested heavily in advertising campaigns, some of which were featured during this year’s Super Bowl.
While these companies experienced steady growth over the past six years, a combination of legal victories and their perceived accuracy in predicting the 2024 U.S. election results further boosted their popularity. Kalshi, for instance, secured a landmark legal victory against the Commodity Futures Trading Commission in 2024, with a federal judge ruling that it could facilitate predictive bets on elections. In the same year, these markets were noted for accurately forecasting President Donald Trump’s 2024 election win. In recent months, prediction markets have also expanded their scope to include military operations, such as “Operation Absolute Resolve” and “Operation Epic Fury.”
The Van Dyke Case and its Implications
Federal prosecutors alleged in April that Army Master Sgt. Gannon Ken Van Dyke utilized his knowledge of “Operation Absolute Resolve” planning and operations to place bets on Polymarket, reportedly generating approximately $400,000 in profits ahead of the mission. Van Dyke has pleaded not guilty to a range of charges, including securities fraud, insider trading, commodities fraud, wire fraud, theft of government property, and related conspiracy counts.
In late October, a federal judge denied motions from his attorney to dismiss the charges. The master sergeant is currently scheduled to face trial on these counts on December 7 in the Southern District of New York. To date, Van Dyke has not faced charges from the Department of Defense. However, experts have previously indicated to Air & Space Forces Magazine that he could face additional charges based on his conduct as a military member and his handling of classified or unclassified information.
The broader political landscape also plays a role in the discussion of prediction markets. The Trump administration has expressed support for the deregulation and expansion of these markets, including efforts to block state-level initiatives to restrict their use. Donald Trump Jr., the son of the president, serves as a paid financial adviser to both Polymarket and Kalshi. Simultaneously, the administration issued an internal staff email in March, strictly prohibiting officials and staff from using nonpublic government information to place bets on these platforms. Federal lawmakers have also engaged with the issue, introducing over a dozen bills or amendments in Congress concerning prediction markets, with at least half specifically addressing their use in relation to military or national security matters.
Consequences and the “Chilling Effect”
Legal experts concur that military personnel who use sensitive information obtained through their military duties to bet on prediction markets could already be prosecuted under existing articles and orders. The primary intent of the new directive, according to Victor Hansen, is to create a “chilling effect,” emphasizing to troops that such activities are unacceptable.
Christopher Nuneviller, another former Army JAG officer now practicing military personnel law, noted that the new directive does not fundamentally alter the landscape for troops concerning actual punishment. “It shouldn’t alter the landscape any more than any other prohibited activity, e.g., drug sales, theft,” he stated, implying that the memo reinforces existing prohibitions rather than introducing entirely new ones. The directive serves to underscore the Pentagon’s commitment to maintaining the integrity of its operations and personnel in the face of evolving financial technologies.
Why This Matters
The Pentagon’s directive prohibiting military personnel from using sensitive information for prediction market betting addresses a critical intersection of national security, ethics, and the rapidly evolving digital financial landscape. This policy is significant for several key reasons:
National Security and Operational Integrity:The misuse of classified or unclassified but sensitive information on prediction markets poses a direct threat to national security. Individuals with access to details about military operations, intelligence, or diplomatic initiatives could exploit this knowledge for personal financial gain. This not only risks compromising ongoing missions and endangering personnel but also creates a perverse incentive structure where individuals might profit from outcomes directly influenced by sensitive government actions. Such activities could undermine the integrity of military planning and execution, making operations more vulnerable to external manipulation or internal betrayal.
Erosion of Public Trust and Ethical Standards:Military service members are entrusted with immense responsibility and access to some of the nation’s most sensitive information. Using this privilege for personal financial speculation on prediction markets is a profound breach of that trust. It erodes confidence in the ethical conduct of the armed forces and can foster a perception of corruption. Maintaining high ethical standards is paramount for military discipline, cohesion, and the public’s faith in its institutions. This directive reinforces the principle that military duty supersedes personal financial enrichment.
Challenges of Enforcement in the Digital Age:The proliferation of online prediction markets, often operating across international borders and sometimes utilizing cryptocurrencies, presents significant challenges for detection and enforcement. The anonymity or semi-anonymity offered by some platforms can make it difficult to trace illicit activities back to individuals. This highlights the ongoing struggle for military intelligence, counterintelligence, and law enforcement agencies to adapt to new forms of financial exploitation and insider threats in an increasingly digital and interconnected world. The memo is a necessary first step, but the actual implementation and policing of such a ban will require sophisticated tools and dedicated resources.
Legal and Policy Precedent:While existing laws already cover insider trading and misuse of government property, this memo establishes a clear, top-down directive specifically addressing prediction markets. It serves as a strong reinforcement of existing ethics rules and provides a foundation for potentially more specific training, oversight mechanisms, and punitive actions. The ongoing criminal case against Master Sgt. Gannon Ken Van Dyke will be a pivotal test case, demonstrating how both the civilian justice system and the military justice system will prosecute such activities, setting a precedent for future enforcement.
Maintaining Discipline and Preventing Corruption:A military force relies on strict discipline, loyalty, and a clear chain of command. Any activity that introduces a potential for personal gain at the expense of duty or national interest can undermine these foundational principles. Prohibiting the use of sensitive information on prediction markets is crucial for preventing corruption, mitigating risks of blackmail, and ensuring that military personnel remain focused on their mission rather than financial speculation. This directive helps to maintain the moral and operational readiness vital to national defense.
Washington D.C.– The United States Pentagon has issued a directive prohibiting military personnel from participating in prediction markets, particularly when leveraging nonpublic information. The move, aimed at safeguarding national security and preventing insider trading, underscores growing concerns within the defense establishment about the intersection of emerging financial technologies and military conduct.
The directive, disseminated via a memo from Alex Hegseth, the acting Principal Deputy Under Secretary of Defense for Personnel and Readiness, constitutes a lawful order. It warns service members that engaging in such activities could lead to severe disciplinary action under the Uniform Code of Military Justice (UCMJ), including career-ending administrative sanctions, loss of security clearances, or even criminal prosecution. While the memo clearly lays out the prohibition, experts point to significant challenges in its implementation, particularly regarding the definition of “nonpublic information” and the lack of a comprehensive education campaign for troops.
Defining the Threat and Consequences
Prediction markets are platforms where participants wager on the outcome of future events, ranging from political elections to economic indicators or even specific military actions. The Pentagon’s concern centers on scenarios where military personnel might use privileged, classified, or sensitive information gained through their duties to gain an unfair advantage or profit on these markets. Such actions could compromise ongoing operations, intelligence efforts, or national security interests.
James Nuneviller, a former Navy Judge Advocate General (JAG), highlighted the broad scope of potential violations. “It’s not just about selling classified information to an adverse state actor,” Nuneviller explained. “It could be leaking information that damages an ongoing operation, or even something as seemingly minor as predicting the deployment of equipment based on nonpublic knowledge.” He emphasized that even without criminal prosecution, merely using these markets in violation of the directive could irreparably damage a service member’s career. The ongoing case of Airman First Class John Van Dyke, who faces charges for allegedly using classified information in prediction markets, serves as a stark example of the severe consequences.
Experts agree that Hegseth’s memo constitutes a lawful order, meaning any violation can be met with disciplinary action. However, a significant gap identified by many is the absence of a clear education or briefing campaign to inform troops about the specifics of the policy. There has been no indication from the Pentagon that such a campaign is in development, leaving many to speculate about the reasons.
One retired JAG, who requested anonymity due to ongoing professional affiliations, suggested that the lack of a briefing plan might stem from a limited legal understanding of these relatively new markets within the services’ JAG Corps. He noted that a more comprehensive directive would have ideally included guidance for individual services to brief and train their personnel on the policy, along with a mandate to report back to the Pentagon on their efforts by a specific deadline. Nevertheless, he added, individual services retain the authority to proactively integrate basic explanations of these markets and the applicable UCMJ regulations into standard commander’s briefs.
The Murky Waters of “Nonpublic Information”
A central challenge lies in the definition of “nonpublic information.” This ambiguity, experts warn, could create confusion for service members attempting to adhere to the directive. “That raises, obviously, a factual question that would relate to the type of information that’s being traded, where was the access?” the retired JAG elaborated. He explained that if the information used is readily available to the public through a simple search engine query, it might not be considered nonpublic. However, if the information, even if seemingly innocuous, crosses over into details specific to a service member’s job or privileged access, it immediately becomes a violation.
The retired JAG offered a hypothetical example: an Airman could, like any civilian, follow news reports and reasonably infer an impending military action. This is public information. But if that Airman then uses specific operational details or internal intelligence gained from their position to refine a prediction market wager, that constitutes a clear violation. He cautioned troops against attempting to interpret the boundaries, advising them not to “play barracks lawyer” and push the edge of what they believe they can bet on. “Don’t even go close to the line of thinking and then find yourself in this position later to try and argue your way out of a sanction just because you think it’s not non-public information,” he advised. “I mean, that’s not a good starting point.”
He further noted that the burden of proof for administrative sanctions, such as a career-ending letter of reprimand or the loss of a security clearance, is significantly lower than for criminal charges. This means that accusations of violating the prediction markets directive, if proven by a preponderance of evidence, could easily lead to severe professional repercussions for service members, even without reaching the threshold for criminal prosecution.
Enforcement and Broader Ethical Concerns
While Hegseth’s memo provides a necessary starting point, critics argue that the conversation needs to shift from a simple prohibition to robust enforcement mechanisms. Janice Luong and Virginia Burger, policy analysts with the Project on Government Oversight (POGO), conveyed their perspective to Air & Space Forces Magazine, stating, “Hegseth’s memo is a good starting point, but we need to shift the conversation from ‘don’t do this’ to enforcement.”
Enforcement, however, presents its own set of complexities. Burger and Luong suggest that the Department of Defense can utilize its existing ethics offices and Inspectors General to address insider trading concerns related to prediction markets. The primary focus for accountability, they believe, should be on breaches of operational security as outlined in the memo. They advocate for integrating prediction market violations into existing operational security compliance requirements, allowing unit commanders to leverage non-punitive judicial measures already at their disposal for enforcement.
POGO holds an even stricter position, extending beyond the military directive. The organization argues that no government official or employee should be permitted to trade on prediction market platforms while employed by the federal government, if the aim is to genuinely address insider trading. They draw parallels with ongoing debates regarding stock trading by members of Congress and other government officials, highlighting public opinion that overwhelmingly favors prohibiting such activities. Luong and Burger pointed out, “Public data shows an overwhelming bipartisan majority of voters favor prohibiting members of Congress and other elected officials from trading stocks, yet they can still do it.”
The analysts underscore the unique challenges posed by prediction markets: tracking is often more difficult, public disclosures are not currently mandated, and the highly specific and granular nature of potential wagers makes it arduous to definitively determine whether a trade relied on nonpublic information. These factors make robust oversight and enforcement particularly demanding in the evolving landscape of digital finance and government ethics.
Why This Matters
The Pentagon’s directive on prediction markets is a significant development with wide-ranging implications for national security, military integrity, and public trust. At its core, it addresses the critical need to prevent the exploitation of privileged information by those sworn to protect it. Allowing service members to profit from nonpublic insights into military operations, intelligence, or policy decisions could severely compromise ongoing missions, endanger personnel, and undermine the strategic advantage of the United States. It creates a direct conflict of interest, eroding the ethical standards expected of military personnel.
Beyond immediate security concerns, this policy reflects a broader challenge faced by governments globally: how to regulate financial activities in an era of rapidly evolving digital markets and instant information. Prediction markets, by their very nature, blur the lines between speculation and insider trading, making oversight difficult. The debate over “nonpublic information” and the need for clear guidelines highlights the complexities of applying traditional ethics rules to new technological platforms. The military’s struggle to effectively educate its vast personnel on these nuanced regulations mirrors similar challenges in other government sectors.
Furthermore, this issue touches upon the fundamental principle of public trust. Citizens expect that government officials, particularly those entrusted with sensitive national security information, are acting in the public interest, not for personal financial gain. Any perception of insider trading or unethical conduct can diminish confidence in the military and government institutions as a whole. The Project on Government Oversight’s call for a broader ban on prediction market trading for all federal employees underscores a growing demand for greater transparency and stricter ethical safeguards across the entire government, setting a precedent for how future emerging financial technologies might be regulated to protect national interests and uphold the integrity of public service.