US Defense Secretary Warns Pentagon Staff Against Insider Trading

The US Defense Secretary has issued an unusual warning aimed at military personnel and Department of Defense employees. Namely, Pete Hegseth has urged against the use of confidential information for trading on prediction markets, saying these types of activities could expose sensitive military plans to foreign adversaries. In a letter dated October 20, Hegseth reminded department personnel that they are not allowed to conduct any financial transactions based on nonpublic information. This includes both trading directly and through another person. The restriction covers financial exchanges, prediction markets and sports betting platforms. The warning comes amid growing scrutiny of prediction markets, where users can place trades on the outcomes of political, military and geopolitical events. “Our Enemies Watch Movements in These Markets” Hegseth emphasized that foreign intelligence services keep a close eye on trading activity, looking for patterns that could potentially reveal details about upcoming US military operations. “Our enemies watch movements in these markets,” he wrote, also warning about trades based on classified or otherwise nonpublic information that could create signals that hostile intelligence services might analyze alongside other information to anticipate US military movements, targets and timing. “When an American service member, intelligence professional, or other Department civilian engages in a financial transaction on a military outcome, they create a signal,” Hegseth said. He added that such activity could put American personnel at greater risk by giving adversaries clues about operations before they take place. Beyond security concerns, Hegseth argued that betting on military outcomes could undermine discipline and distract personnel from their responsibilities. “We are restoring lethality, discipline, and singular focus on fighting and winning our nation’s wars, and nothing should distract us from that sacred mission. Not entertainment. Not a payout,” he wrote. Soldier Accused of Profiting From Classified Information The warning follows a high-profile federal case involving Master Sgt. Gannon Ken Van Dyke, a US Army Special Forces soldier charged in April with allegedly using classified information to make approximately $409,000 in profits on Polymarket. According to the indictment, Van Dyke placed a series of trades worth around $33,000 on the timing of Venezuelan leader Nicolás Maduro‘s departure from power. Federal prosecutors allege that he had access to sensitive information through his involvement in planning and carrying out the US military operation to capture Maduro. The allegations have raised questions about whether people with access to confidential government information could use prediction markets to profit from events they know are likely to occur. The charges remain allegations unless established in court. Millions in Suspicious Trading Profits Concerns have also been raised about trading patterns across prediction markets. In August, the Anti-Corruption Data Collective flagged 152 accounts that traded contracts linked to US military operations and were suspected of using nonpublic information. According to the findings of the group, the accounts recorded a 97.2% win rate and generated approximately $8 million in profits from $2 million in trades.