In a new directive issued by the Defense Secretary Pete Hegseth, the Pentagon has emphasized that troops cannot use "non-public information" to place bets on prediction markets.
According to the Secretary, it is not only a matter of insider trading but also national security. Hegseth wrote in the document: "Our enemies watch movements in these markets. When an American Service member, intelligence professional, or other Department civilian engages in a financial transaction on a military outcome, they create a signal."
The Pentagon is also concerned with prediction markets warping someone's judgement. The memo continues: "A logistician with money riding on a strike date has an interest in that date. An analyst with a position on an outcome has an interest in that outcome.”
Violators could be subject to administrative punishment and criminal charges under the Uniform Code of Military Justice or federal law.
The new directive comes months after a US Special Forces member involved in capturing the Venezuelan President was charged with using classified information to win $400,000 on Polymarket.
However, according to the Associated Press, the issue of government employees leveraging knowledge to win big on prediction markets goes beyond the Pentagon.
In April, a group of new accounts made highly specific and well-timed bets on Polymarket right before President Trump announced the US-Iran ceasefire. The bets resulted in hundreds of thousands of dollars in profits for the new accounts.
Despite the incident never being linked to any specific government worker, the White House has since warned staff against using private information on prediction markets.
The issue of prediction markets and insider trading has been subject to much debate. Earlier this month, the NFL has told the Supreme Court that they considered the platforms gambling and needed to be regulated as such.
Moreover, the National Football League called for certain positions to be outright banned, as it considers them too vulnerable to insider trading. Some of these positions include whether a kicker would miss a field goal; a quarterback's first pass would be incomplete and whether someone would get injured.
Similarly to the NFL, the NBA issued a memo to its sports betting partners urging them to restrict wagers included with parlays and "first of" markets such as the winner of the opening tip
