US Defense Secretary Pete Hegseth has barred service members, intelligence staff and Defense Department civilians from using nonpublic government information to bet on military operations, naming the prediction markets Polymarket and Kalshi. The one-page memo, dated Tuesday 20 October 2026, has not been published. CBS News obtained it and reported it first on 22 October at 3:21 pm EDT (19:21 UTC); DefenseScoop, which says a source confirmed the document, and the Associated Press reported the same content later that day.
This Pentagon prediction market ban is an internal order, not a new law. It creates no new offence and no new penalty. What it does is put prediction markets by name inside the existing military and federal rules, six months after a US Army soldier became the first person charged by the Commodity Futures Trading Commission (CFTC) with insider trading on an event contract.
A defense official told the AP the department had nothing to add beyond the memo. No statement from Polymarket, Kalshi or the CFTC on the memo had appeared in the reports we found by 05:00 UTC on 23 October.
What the Pentagon prediction market ban covers
According to DefenseScoop, the memo went to senior Pentagon leadership, the combatant commanders and the directors of Defense agencies and field activities. It forbids placing financial wagers on the basis of nonpublic government information, on traditional betting platforms as well as on prediction markets “such as Polymarket or Kalshi”.
The key line is about classification. “This prohibition applies whether the transaction is informed by classified or unclassified information,” Hegseth wrote, as quoted by DefenseScoop. That matters because much of what a soldier or a logistician knows before an operation, such as a deployment date, a fuel order or a leave cancellation, is not classified but is still not public.
The people covered are listed in the memo itself as an “American Service member, intelligence professional, or other Department civilian”, in the wording quoted by CBS News and the AP. None of the reports says whether contractors, family members or retired personnel fall under it. Nor does any of them describe a ban on betting in general: the order targets the use of nonpublic information.
Penalties come from existing law
“Violations may result in administrative, disciplinary, and, where appropriate, criminal action,” the memo says, under the Uniform Code of Military Justice (UCMJ) and/or applicable federal law, according to DefenseScoop. None of the three reports cites a UCMJ article or a sentence range. Nor do they say how the department would trace a bet placed from a crypto wallet that carries no name.
“Our enemies watch movements in these markets”
Hegseth gave two reasons. The first is operational security. “Our enemies watch movements in these markets,” he wrote, in a line quoted by CBS News, DefenseScoop and the AP. CBS reports his argument that a service member who trades on a military outcome creates a signal, and that foreign intelligence services could study betting activity to anticipate operations, targets and timing.
The second reason is judgment. “Beyond operational security, financial stakes can warp judgment,” Hegseth wrote, according to the AP, adding: “A logistician with money riding on a strike date has an interest in that date.”
That is the specific risk of event contracts compared with stocks. A Polymarket contract can ask a yes-or-no question about a date, a target or a ceasefire. Someone who helps decide that date can, in principle, both know and influence the answer.
The Van Dyke case: the first insider charge on an event contract
Behind the order sits a case that is still in court. On 23 April 2026 the CFTC sued Gannon Ken Van Dyke, an active-duty Army service member, in the Southern District of New York. The regulator alleges that he took part in planning and carrying out “Operation Absolute Resolve”, the operation to capture Venezuela’s Nicolás Maduro and his wife Cilia Flores, and that he then traded on Polymarket under the handle “Burdensome-Mix” using nonpublic information about it.
According to the CFTC, between 30 December 2025 and 2 January 2026 he bought more than 436,000 “Yes” shares of the contract “Maduro Out by January 31, 2026?” and made more than $404,000 in profit. The agency called it its first insider-trading charge involving event contracts and its first use of the so-called “Eddie Murphy Rule” on the misuse of government information. It is seeking restitution, disgorgement, civil penalties, trading bans and an injunction.
Federal prosecutors in the same district unsealed a criminal indictment the same day. The AP describes Van Dyke as a 38-year-old Master Sergeant in the Special Forces. He has pleaded not guilty to all charges, Cointelegraph reports, and DefenseScoop says he was released on bond. He is presumed innocent, and none of the allegations has been proven in court.
Stake and profit are two different figures
Coverage of the case often blurs two numbers. The money he is accused of staking was more than $32,500 according to the AP, or more than $33,000 according to CBS News. Most of it went in on the night of 2 January, hours before the first missiles hit Caracas, the AP says. The alleged gain is about twelve times larger: more than $404,000 in the CFTC complaint. CBS puts his alleged winnings above $409,000 and DefenseScoop the alleged profit at nearly $410,000. The AP’s own introduction speaks of more than $400,000 “won”, which is the gain, not the stake. All of these are allegations.
| Figure | Amount | Source |
|---|---|---|
| Alleged stake on Polymarket | More than $32,500 | AP, 22 October 2026 |
| Alleged stake on Polymarket | More than $33,000 | CBS News, 22 October 2026 |
| “Yes” shares bought, 30 Dec 2025 to 2 Jan 2026 | More than 436,000 | CFTC complaint, 23 April 2026 |
| Alleged profit | More than $404,000 | CFTC complaint, 23 April 2026 |
| Alleged winnings | More than $409,000 | CBS News, 22 October 2026 |
| Alleged profit | Nearly $410,000 | DefenseScoop, 22 October 2026 |
Is a Polymarket contract a swap?
The case may turn on a legal question rather than on the trades. Van Dyke has asked the court to dismiss the indictment on several grounds, one being that the CFTC’s treatment of event contracts as “swaps” is ambiguous, Cointelegraph reported on 10 August. Judge Andrew Carter stayed the CFTC’s civil case until the criminal case ends. A trial could come in late 2026 or early 2027; no date was confirmed in the reports we read.
If the court accepted that argument, the commodities charges would be harder to sustain. A disciplinary rule inside the military does not depend on how a contract is classed under the Commodity Exchange Act.
Iran bets, wallets and referrals: why the order came now
Venezuela was not the only episode. On 7 April 2026, hours before President Trump announced a ceasefire with Iran on Truth Social, at least 50 Polymarket accounts placed large “Yes” bets on it, Euronews reported from public blockchain data. One account created that same day bet about $72,000 and showed a reported profit of $200,000; another was opened 12 minutes before the post. Blockchain data does not show who controls those wallets, and Euronews reported no charges.
In February, Israeli authorities indicted a military reservist and a civilian accused of using classified information to bet on Polymarket on Israeli strikes on Iran, according to Cointelegraph.
The scale is still unclear. DefenseScoop recalls that CNN reported in August that more than 150 Polymarket wallets may have traded on military insider information, citing research by the Anti-Corruption Data Collective, and that Reuters reported the same month that Polymarket had referred “dozens” of possible military insider-trading cases to the Justice Department. We have not seen the underlying report.
Washington had already moved before the Pentagon. A White House email to staff dated 24 March, first reported by the Wall Street Journal and then by CNN on 10 April, told staff it is a “criminal offense for anyone to use nonpublic information to buy or sell these contracts”, and named Kalshi and Polymarket. In May, House Oversight chair James Comer wrote to Polymarket CEO Shayne Coplan and Kalshi CEO Tarek Mansour for their insider-trading records, saying “More than 80 suspiciously timed trades were placed ahead of Iran military operations”, Cointelegraph reported on 22 May.
What the platforms and Congress have said so far
Neither platform has commented on the Hegseth memo in the reports we found. Their earlier answers to Comer were short: Polymarket said it “maintains a comprehensive market integrity framework”, and Kalshi said it was “proud of [its] comprehensive protections against insider trading”.
The two operate under different rules. Kalshi is a CFTC-regulated exchange, and in April it fined and suspended three congressional candidates it said had bet on their own races, the AP reports. Polymarket’s international site runs on a blockchain, which makes trades public but leaves the people behind wallets hard to identify. Kalshi is also fighting several US states over its sports contracts, as in Utah’s lawsuit against Kalshi and two Susquehanna firms.
In Congress, Rep. Ritchie Torres said in January that he would back a “Public Integrity in Financial Prediction Markets Act of 2026”. As described by Bitcoin.com on 5 January, it would bar elected officials, political appointees and executive branch employees from such contracts when they hold material nonpublic information or could obtain it through their duties. We could not confirm where the bill stands.
What remains open
The text of the order, its formal title and its effective date are not public, and the Pentagon has not said whether it will publish them. Nothing in the reports says whether the department will ask platforms for data, work with the CFTC or check personnel accounts. The CFTC has not said anything on the memo.
The next step is in the Southern District of New York, where Judge Carter has to rule on Van Dyke’s motion to dismiss, including the argument that a contract on Maduro’s removal is not clearly a swap. No hearing date had been reported by 23 October.