A recent Pentagon memo barring troops from placing bets on prediction markets using classified or sensitive information is a necessary step toward clamping down on such activity in the ranks, but experts tell Air & Space Forces Magazine that enforcement will remain a major challenge.
Secretary of Defense Pete Hegseth issued the memo Oct. 20, nearly six months after an Army Special Forces master sergeant was indicted for allegedly using a prediction market to wager on events connected to the capture of Venezuelan President Nicholas Maduro.
“All Department of War personnel are prohibited from engaging in financial transactions using nonpublic information, either directly or indirectly through a third party,” the memo states.
The memo goes on to say the directive applies to both classified and unclassified information and specifically cites platforms such as Polymarket and Kalshi as examples.
The directive to the troops puts a lawful order in place from the top Pentagon official across the forces, experts agreed.
But the same experts told Air & Space Forces Magazine that the memo doesn’t go far enough to mandate specific training and information sessions for troops on the increasingly popular platforms, and instead relies on military members erring on the side of caution, or “When in doubt, don’t do it,” as retired Army judge advocate general Victor Hansen said.
“The broadest intent here is to kind of put a shot over the bow to everybody and say, ‘You probably ought not to be involved in this prediction market stuff in the first place,’” Hansen said.
A Department of Air Force spokesperson told Air & Space Forces Magazine that officials do not discuss specific counterintelligence training but that “leaders continually emphasize the expectation of all Airmen and Guardians to understand their responsibilities for protecting information and reporting potential violations.”
The spokesperson encouraged Airmen and Guardians who suspect or witness their colleagues using nonpublic information on the markets to report those incidents.
“Airmen and Guardians who observe potential misconduct should report their concerns through established supervisory, command, inspector general or law enforcement channels,” the spokesperson wrote.
When queried about specific regulations or laws governing predictive market use for military personnel, a Pentagon official told Air & Space Forces Magazine that “all Executive Branch personnel are prohibited from engaging in financial transactions using nonpublic information or allowing the improper use of nonpublic information to further their own private interests or those of another, whether through advice or recommendation, or by knowing unauthorized disclosure.”
Those restrictions cover Active, Guard, and Reserve personnel and are covered by Pentagon ethics regulations, the spokesperson wrote.
The Markets
Prediction markets have exploded in popularity in recent years, reportedly surpassing $44 billion in trading volume in 2025. But they actually originated decades ago, with exchanges such as the Iowa Electronic Market and Idea Futures in the late 1980s and mid-1990s, More broad-reaching, commercial prediction markets such as TradeSports and InTrade gained a niche following online in the early 2000s. The idea is somewhat analogous to futures markets: traders place bets on the outcome of an event, from the weather to a sporting contest to geopolitical developments.
The launch of Polymarket in 2020 and Kalshi in 2021 brought prediction markets into the public eye. A host of competitors, from gambling companies to cryptocurrency exchanges, have raced to launch their own event contract platforms. All of the companies have poured funds into heavy advertising, some of which aired during this year’s Super Bowl.
Though the companies steadily grew in popularity over the past six years, a combination of legal victories and successes in predicting the 2024 U.S. election results helped them gain traction. Kalshi won a landmark legal case against the Commodity Futures Trading Commission in 2024, in which a federal judge ruled that it could allow predictive bets on elections. That same year, the markets accurately predicted President Donald Trump’s 2024 election win.
In recent months, prediction markets have spread to military operations such as Operation Absolute Resolve and Operation Epic Fury.
Federal prosecutors alleged in April that Army Master Sgt. Gannon Ken Van Dyke used his knowledge of Absolute Resolve planning and operations ahead of the mission to make bets on Polymarket and pocket about $400,000 in profits.
Van Dyke pleaded not guilty to charges of securities fraud, insider trading, commodities fraud, wire fraud, theft of government property, and related conspiracy counts.
In late October, a federal judge ruled against his attorney’s motions to dismiss the charges. The master sergeant is currently facing a trial on those counts on Dec. 7 in the Southern District of New York.
To date, he has not faced charges from the Defense Department. But he could face additional charges based on his conduct as a military member and his handling of classified or unclassified information, experts previously told Air & Space Forces Magazine.
The Trump administration supports the deregulation and expansion of prediction markets, including blocking state-level efforts to curb their use.
Donald Trump Jr., the president’s son, serves as a paid financial adviser to both Polymarket and Kalshi.
At the same time, the administration issued a staff email in March strictly prohibiting officials and staff from using nonpublic government information to bet on the platforms.
Federal lawmakers have introduced more than a dozen bills or amendments in Congress dealing with prediction markets, and at least half specifically address market use as it relates to military or national security issues.
The Consequences
Troops who use sensitive information obtained through their military job or duties to bet on prediction markets can already be prosecuted under existing articles and orders, experts agreed.
The idea with the directive is to emphasize that troops shouldn’t do this, to create a “chilling effect,” said Hansen, a 20-year veteran Army JAG officer who now teaches at New England Law School.
The new directive doesn’t really change conditions for troops when it comes to actual punishment, said Christopher Nuneviller, another former Army JAG who now practices military personnel law.
“It shouldn’t alter the landscape any more than any other prohibited activity, e.g., drug sales, theft of equipment, or selling classified information to an adverse state actor, etc.,” Nuneviller wrote in an email.
Even short of actual criminal prosecution, such as what Van Dyke faces, using these markets can now easily be understood to damage a person’s career, he said.
But while an order is an order, and experts interviewed agree that the the Pentagon memo constitutes a lawful order, educating the troops isn’t included in this directive. And there has been no indication that such an education or briefing campaign is in the works.
Hansen suspects the lack of a briefing plan could be due to the limited legal understanding of these relatively new markets on the part of the services’ JAG Corps.
The retired JAG said it would have been helpful if the directive included guidance to the individual services to brief and train their troops on the policy and report back to the Pentagon on those efforts by a specific date.
But the services can take it on themselves and add a basic explainer of these markets and the various Uniform Code of Military Justice and other conduct-based regulations into a standard commander’s brief to the troops.
Where the waters might get muddy is in the definition of “nonpublic information,” Hansen said.
“So that raises, obviously, a factual question that would relate to the type of information that’s being traded, where was the access?” Hansen said. “If it’s the same kind of information that anybody can get just by Googling, then maybe it’s not non-public in nature.”
Information sources and how they apply can be kind of broad in these scenarios, he said, and in a legal sense could butt up against some First Amendment issues.
For example, an Airman could, like anyone else, easily watch the news and cobble together enough facts to determine that the United States might be going to war in the next week. That’s clearly public information. But if information used crosses over into his or her job, then that’s a violation.
Hansen, offering a bit of free legal advice, said that troops shouldn’t try to play barracks lawyer and push the edge on what they can or can’t bet on.
“Don’t even go close to the line of thinking and then find yourself in this position later to try and argue your way out of a sanction just because you think it’s not non-public information,” he said. “I mean, that’s not a good starting point.”
Parsing particular UCMJ violations doesn’t help either.
Hansen noted that the level of proof for a career-ending letter of reprimand, administrative sanctions, or even the loss of a security clearance is much lower than for a criminal charge and easily met if troops are accused of violating the prediction markets directive now in place.
The Complications
“Hegseth’s memo is a good starting point, but we need to shift the conversation from ‘don’t do this’ to enforcement,” Janice Luong and Virginia Burger, policy analysts with the Project on Government Oversight, told Air & Space Forces Magazine in an email.
But enforcement might be tricky.
Burger and Luong pointed out that the Department of Defense can use its ethics offices and inspectors general to address any insider trading concerns. The main focus for holding violators accountable would be operational security breaches, such as those referenced in the memo.
While penalties specific to prediction market use should be defined, the pair wrote that some legal and career consequences can be folded into existing operational security compliance requirements.
“The military can easily fold prediction market use into those existing structures and rely on the non-punitive judicial measures already available to unit commanders for enforcement,” they wrote.
Their organization holds its own strict opinion that goes beyond prohibiting nonpublic use of the markets.
“POGO believes that no government official or employee should be allowed to trade on prediction market platforms for as long as they’re employed by the federal government, if we truly want to address insider trading in government,” the analysts wrote.
They highlight ongoing problems in the use of regular stock trading by government officials, including members of Congress.
“Public data shows an overwhelming bipartisan majority of voters favor prohibiting members of Congress and other elected officials from trading stocks, yet they can still do it,” they wrote.
With predictive markets, tracking is more difficult, disclosures are not currently required, and the events that can be wagered on are so specific and minute that it’s hard to tell whether a trade made by a platform user relied on nonpublic information, they wrote.