Hegseth warns prediction market bets endanger US troops
A recent Pentagon memo warns that military personnel using nonpublic information to bet on prediction markets compromise operational security and put service members at risk.
Radwan AbdulhadiEditor and technology writer
Pentagon Warns Against Financial Wagers on Military Outcomes
Defense Secretary Pete Hegseth issued a memo warning military personnel against using nonpublic information to make bets on prediction markets, saying the wagers could give important clues to enemy countries. Additional details regarding the directive were initially published by CBS News.
The subject line of the October 20 memo read, “Do Not Compromise Military Operations for Personal Financial Gain.” Hegseth’s directive was sent out to senior Pentagon leadership, Combatant Command leaders, and Defense Department field activity directors.
Operational Security Risks and Foreign Intelligence Exploitation
According to the memo, hostile foreign intelligence services actively watch movements in these betting markets. When an American service member, intelligence professional, or Department civilian transacts on a military outcome, they generate a critical signal.
That signal can be aggregated, correlated, and exploited to anticipate military movements, targets, and timing. The safety of service members often depends on adversaries remaining unaware of upcoming operations, making personnel exposure for personal financial gain a severe operational risk.
Past Incidents Involving Insider Bets and Suspicious Wallets
Concerns over insider trading in military prediction markets follow several documented events. In April, a US Army soldier was arrested and charged with using confidential information to make $410,000 in Polymarket bets concerning the timing of the capture of Venezuelan President Nicolás Maduro.
Furthermore, an August report by the Anti-Corruption Data Collective revealed that the group identified 152 suspicious wallets placing longshot bets on military and defense markets, ultimately winning a combined total of $8 million.
Broad Prohibition Across All Financial and Prediction Platforms
Hegseth’s memo clarifies that the prohibition applies universally to all financial platforms, including traditional betting services alongside prominent prediction markets such as Polymarket and Kalshi. Defense Department personnel are strictly barred from making financial transactions informed by nonpublic information.
The restriction applies regardless of whether the nonpublic information is classified or unclassified. “All Department of War personnel are prohibited from engaging in financial transactions using nonpublic information, either directly or indirectly through a third party,” Hegseth wrote.
Violators may face administrative, disciplinary, and criminal actions under the Uniform Code of Military Justice or applicable federal laws.
Warped Judgment and Broader Administration Warnings
Beyond operational security risks, the memo cautions that financial stakes can severely warp professional judgment. A logistician or an analyst with money riding on a specific outcome or strike date develops an inherent personal interest in that result.
The Associated Press reported that this internal warning follows other administration notices regarding prediction market activities. A group of new accounts previously made highly specific, well-timed bets on whether the US and Iran would reach a ceasefire.
Those wagers resulted in hundreds of thousands of dollars in profits for the new customers just before President Donald Trump announced the ceasefire, prompting an immediate White House warning to staff.
In a separate incident, a Trump teleprompter aide reportedly made $100,000 on Kalshi by betting on the specific content of prepared remarks.
Prediction markets have flourished amid the administration's light-touch regulatory approach, while debates continue over whether state governments possess the authority to impose restrictions or if federal jurisdiction preempts local laws.
Sources
- Ars TechnicaHegseth warns prediction market bets warp military judgment, endanger troops
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