Pentagon Reaffirms Ban on Using Military Information for Bets After Charges Alleging Profits Exceeding $400,000
Key Facts
U.S. Defense Secretary Pete Hegseth reaffirmed a ban on using nonpublic information to trade on prediction markets in a memorandum dated Tuesday, according to the Associated Press. The directive follows the announcement of federal charges against a soldier accused of using classified military information to place bets that prosecutors said generated profits exceeding $400,000. The ban covers trading on platforms such as Polymarket and Kalshi using classified information, as well as unclassified information unavailable to the public. The memorandum was addressed to senior Pentagon leadership and combatant commanders, according to CBS News. Violators could face administrative action and criminal charges under the Uniform Code of Military Justice or federal law, according to the Associated Press. Hegseth warned in the memorandum that "our enemies are monitoring movements in these markets." He also warned that personal financial interests could distort professional judgment, linking the directive to security risks and conflicts of interest.
The U.S. case concerns soldier Gannon Ken Van Dyke, who the Justice Department says participated in planning and carrying out the operation to capture Nicolas Maduro. The department accuses him of using classified information about the operation to bet on outcomes related to it. According to the U.S. Attorney's Office for the Southern District of New York, he wagered a total of about $33,034 on those outcomes. The indictment says his trades included contracts linked to Maduro and Venezuela and that he executed them on 13 separate occasions during the alleged scheme. He is also accused of taking steps to conceal his identity as the trader in those markets, according to a Justice Department statement. The indictment explains that each market in question is framed as a question about a future event with a yes-or-no answer. The Commodity Futures Trading Commission described its action against Van Dyke as its first case accusing a trader of insider trading in event contracts.
The memorandum was preceded by congressional calls for broader restrictions on military personnel betting on national security matters. According to Representative Eugene Vindman's office, lawmakers called in a joint letter for all military personnel and civilian employees to be barred from using prediction markets to place such bets. The letter framed the requested ban as covering "any subject related to national security," while Hegseth's directive focuses on the use of nonpublic information in trading. A statement from Vindman's office cited contracts linked to operations near Kharg Island among the examples presented in support of the congressional demand. It also cited contracts concerning the rescue of U.S. pilots whose aircraft had been shot down, with the examples encompassing bets on military operations and rescue missions.
On the regulatory front, the Commodity Futures Trading Commission had previously opened a consultation on rules governing event contracts. The consultation included the possibility of amending existing rules or issuing new ones, according to an agency statement. It also addressed the types of contracts that could be prohibited as contrary to the public interest, placing the nature of events offered for betting within the scope of the regulatory review. In separate guidance, the commission stressed that designated contract markets act as "front-line regulators." It said those exchanges must take proactive steps to ensure compliance with the law and the agency's regulations, assigning them direct supervisory responsibility for adherence to the rules.
In its court action, the Commodity Futures Trading Commission is seeking civil penalties against Van Dyke. Its requests include disgorgement of profits it says were generated by the scheme, as well as restitution, according to the civil complaint. The agency is also seeking trading and registration restrictions among the measures it is asking the court to impose on the defendant. The criminal case includes a wire fraud charge carrying a maximum prison sentence of 20 years, according to the U.S. Attorney's Office for the Southern District of New York. That remains the maximum potential sentence for that charge, while the acts attributed to Van Dyke are presented as allegations, not a conviction.