Hegseth bans Pentagon staff from using military secrets to bet on prediction markets
Defense Secretary Pete Hegseth issued a directive on October 20, 2026 banning Department of Defense personnel from using classified or unclassified nonpublic information to place bets on prediction markets. The policy specifically names Polymarket and Kalshi as covered platforms. It applies to service members, civilian employees, and contractors with access to sensitive operational details. Hegseth warned that adversaries monitor market movements for intelligence signals. The directive extends existing military ethics rules rather than imposing an outright ban on prediction market participation.
Pentagon personnel with access to classified war plans and deployment schedules can move prices on geopolitical event contracts before news breaks. The memo's explicit naming of Polymarket and Kalshi signals that the platforms have drawn enough defense-linked volume to worry military counterintelligence. This is not an isolated ethics memo; it lands while the CFTC is drafting swap rules and state attorneys general are already suing those same platforms for gambling violations in Ohio, Tennessee, Utah, and Missouri.
The ban creates a new compliance headache for platforms: they must now screen for Pentagon-linked accounts or face questions about why military insiders are still trading. Trading firms that provide liquidity, like Susquehanna in the Utah suit, face parallel reputational risk if their market-making is tied to classified leaks. The directive also widens the insider-trading conversation beyond the SEC's stock jurisdiction into event contracts no regulator has clearly mapped.