Pete Hegseth Bans Insider Bets on Prediction Markets to Protect Troops

The Department of Defense has moved to shut down a specific channel of information leakage that defense officials fear is putting soldiers at risk.

The new guidance targets the fast-growing prediction market sector, where users wager real money on the likelihood of specific future events. Hegseth’s memo explicitly covers all financial platforms, including traditional betting services and digital prediction markets like Polymarket and Kalshi. The rule prohibits any financial transaction by defense personnel that is informed by nonpublic information. This restriction applies whether that information is formally classified or merely unclassified.

The directive was distributed to senior Pentagon leadership, Combatant Command leaders, and Defense Department field activity directors. The core argument is that market movements can serve as unintended signals to adversaries. Hegseth noted that hostile foreign intelligence services aggregate and correlate these trading patterns to anticipate American military targets, movements, and timing. He emphasized that the lives of service members often depend on the enemy not knowing what is coming next.

The warning comes after a series of incidents highlighted the potential for financial gain to influence military judgment. In April, a US Army soldier was arrested and charged with using confidential information to make bets on Polymarket. The soldier wagered on the timing of the military’s capture of Venezuelan President Nicolás Maduro and reportedly earned $410,000 from those positions. This case provided a concrete example of how insider knowledge could translate into significant personal profit at the expense of operational secrecy.

Further evidence of widespread activity emerged in August when the Anti-Corruption Data Collective released a report. The group identified 152 suspicious wallets that placed longshot bets on military and defense markets. These accounts collectively won approximately $8 million. The findings suggest that the practice is not limited to a single individual but represents a broader pattern of trading behavior within the defense ecosystem.

The stakes for the military are high, as the memo argues that a force that protects its personnel must avoid exposing them to the enemy for personal gain. Hegseth wrote that the men and women who carry the flag into harm’s way deserve a force that safeguards their operational advantage. The memo serves as a formal instruction to align financial behavior with strategic objectives.

For investors and market participants, the memo signals a stricter enforcement environment for defense-related prediction markets. It clarifies that the boundary between public and nonpublic information is the critical factor in determining compliance. Personnel are now explicitly told not to compromise military operations for personal financial gain, a principle that aims to restore discipline in a rapidly evolving digital betting landscape.