TLDR:Pentagon bans military and civilian personnel from using nonpublic information to trade on Polymarket and Kalshi.The directive covers classified and unclassified information, including trades made indirectly through third parties.Defense Secretary Pete Hegseth warns that military-related bets could expose sensitive operations to foreign intelligence services.Violations may result in administrative, disciplinary, or criminal action under military rules and federal law.The Pentagon has banned military and civilian personnel from trading with nonpublic information on prediction markets, including Polymarket and Kalshi. Defense Secretary Pete Hegseth issued the directive on October 20 to senior Pentagon leaders and combatant commanders. The order covers classified and unclassified information, with disciplinary or criminal penalties possible for violations.Pentagon Ban Covers Trading With Nonpublic Military InformationHegseth’s memorandum prohibits department personnel from using information unavailable to the public for financial transactions. The restriction covers trades placed directly or through another person, and it applies beyond prediction markets.Traditional betting platforms and other financial markets fall under the same rule when personnel use nonpublic information. The directive does not prohibit every lawful trade by service members, but it bars transactions based on privileged knowledge.Hegseth bars US forces from using undisclosed information to bet on Polymarket, Kalshihttps://t.co/dVs3hvi8Pk— The Hill (@thehill) October 22, 2026Hegseth warned that foreign intelligence services could study trading patterns to identify potential U.S. military actions. “Our enemies watch movements in these markets,” he wrote, referring to financial activity around military outcomes.He said bets on operation dates or military results could reveal information about troop movements, targets, and timing. The memorandum further warned that financial positions could influence the judgment of military analysts and logistics personnel.Violators may face administrative measures, military discipline, or criminal prosecution under federal law or the Uniform Code of Military Justice.Military Insider Trading Case Fuels Scrutiny of PolymarketThe order follows an April enforcement case involving U.S. Army Master Sergeant Gannon Ken Van Dyke. Federal authorities accused him of using classified details about the operation to capture Venezuelan leader Nicolás Maduro. According to the CFTC, his alleged Polymarket trades generated more than $404,000 in profits.Prosecutors said he placed about $33,000 in wagers before the January military operation became public. Van Dyke pleaded not guilty to the charges, and the allegations remain subject to court proceedings. The CFTC separately filed a civil complaint concerning his alleged misuse of government information.Questions about advance knowledge have extended beyond that case, including bets placed before U.S. strikes on Iran. Six recently created Polymarket wallets reportedly earned nearly $1 million, prompting questions about the timing of their positions. Those transactions drew scrutiny, though available reports did not establish that the traders had classified information.Congress Examines Prediction Market Insider Trading ControlsCongress has been examining how prediction platforms detect and stop trading based on confidential information. On May 22, House Oversight Chairman James Comer opened an investigation into Polymarket and Kalshi.The committee sought records about identity checks, suspicious trades, and the companies’ methods for enforcing market rules. Its inquiries followed concerns that government officials could use restricted information to profit from contracts on public events.Kalshi has faced separate questions about potential insider activity in political markets, including bets preceding a White House appointment. The platform confirmed an inquiry into those wagers, but no public finding had established wrongdoing in that case.Kalshi has introduced employment disclosures for some higher-risk markets, while its surveillance team reviews suspicious activity. Polymarket has also said it cooperated with investigators in the Van Dyke case.Hegseth’s October 20 directive now sets out a department-wide rule covering military and civilian staff. It directs personnel to avoid using nonpublic information for personal gain, whether trading themselves or through other parties.The post Pentagon Bans Military Personnel From Insider Trading on Polymarket and Kalshi appeared first on Blockonomi.