Pentagon to troops: stop leaking military secrets via prediction market bets

Pete Hegseth has issued a memo ordering military and defence personnel to keep their hands off prediction markets when they have access to nonpublic information. The concern is straightforward: enemies aren't just watching troop movements, they're watching market movements too.

The memo, dated October 20 and published by CBS News, went out to senior Pentagon leadership, Combatant Command leaders, and Defence Department field activity directors. Its subject line left nothing to interpretation: "Do Not Compromise Military Operations for Personal Financial Gain."

Hegseth's argument is that even small, seemingly anonymous trades create readable signals. Hostile intelligence services can aggregate and correlate unusual betting patterns to infer where, when, and what the US military is planning. A cluster of well-timed bets on a specific military outcome isn't just suspicious, it's potentially a roadmap.

This isn't theoretical. In April, a US Army soldier was arrested for allegedly using classified knowledge to place $410,000 worth of bets on Polymarket, specifically wagering on the timing of a potential military capture of Venezuelan President Nicolás Maduro. Separately, an August report from the Anti-Corruption Data Collective identified 152 suspicious wallets that collectively won around $8 million on military and defence prediction markets. Longshot bets, all of them.

The prohibition in Hegseth's memo covers all financial platforms, including both traditional betting services and prediction market platforms like Polymarket and Kalshi. It applies to nonpublic information whether classified or not, and whether trades are made directly or routed through a third party. Penalties range from administrative action to criminal charges under the Uniform Code of Military Justice.

Hegseth also flagged a subtler problem: financial stakes corrupt decision-making. A logistician who has bet on a particular strike date now has a personal interest in that date happening. An analyst with a position on an outcome has an incentive to see that outcome materialise. That's not a great dynamic inside a military command structure.

Both Kalshi and Polymarket already prohibit insider trading in their terms of service, but a platform ban is rather less frightening than a court martial.

This wasn't the Trump administration's first brush with the problem. In April, a group of newly created Polymarket accounts placed suspiciously well-timed bets on a US-Iran ceasefire, raking in hundreds of thousands of dollars shortly before Trump announced the deal. The White House issued an internal warning to staff the same day that story broke. There was also a separate incident involving a Trump teleprompter aide who allegedly made $100,000 on Kalshi by betting on what Trump would say in prepared remarks. Quite the edge.

The irony is that prediction markets have thrived precisely because the Trump administration has taken a permissive regulatory stance toward them. The administration is actively fighting state-level attempts to restrict the markets, arguing that the Commodity Futures Trading Commission holds exclusive jurisdiction and state laws don't apply. Courts have disagreed with each other on this, and several state governments are pushing for Supreme Court clarification. So the administration simultaneously wants these markets to flourish and wants its own personnel nowhere near them. A tidy contradiction.