Hegseth Directive Bars Military Personnel From Using Nonpublic Data on Prediction Markets
The order creates a formal policy framework linking military information security to civilian financial markets, a regulatory gap that had not been explicitly addressed by prior Pentagon guidance.
Defense Secretary Pete Hegseth issued a written directive on Tuesday, October 20, 2026, prohibiting U.S. Military personnel, intelligence professionals, and Department of Defense civilians from using nonpublic government information to place bets on prediction markets, according to a one-page memo reviewed by the Associated Press and reported by the New York Post.
The memo, dated Tuesday and first reported by CBS News before broader publication, states that financial transactions tied to military outcomes by service members or intelligence professionals generate observable signals. "Our enemies watch movements in these markets," Hegseth wrote in the directive. "When an American Service member, intelligence professional, or other Department civilian engages in a financial transaction on a military outcome, they create a signal."
Prediction markets are platforms that allow users to buy and sell contracts whose value is tied to the probability of a future event occurring. In recent years, platforms such as Polymarket and Kalshi have expanded their offerings to include geopolitical and military events, raising questions among national security researchers about whether informed insiders could exploit such platforms in ways that compromise operational security or constitute insider trading.
The directive targets the use of "nonpublic information," a term that encompasses classified material, sensitive but unclassified data, and other government information not available to the general public. The memo does not, based on reporting by the Associated Press and the New York Post, specify civil or criminal penalties for violations, nor does it reference a particular statutory authority under the Uniform Code of Military Justice or federal securities law. The specific enforcement mechanism remains unknown. A copy of the full directive, if filed publicly, would clarify those details.
The Pentagon has existing regulations governing financial conflicts of interest for federal employees under the Standards of Ethical Conduct for Employees of the Executive Branch, codified at 5 C.F.R. Part 2635. Whether Hegseth's directive supplements those regulations or operates independently is not established in available public reporting. The Office of Government Ethics, which oversees those regulations, has not issued a public statement as of October 23, 2026.
The Commodity Futures Trading Commission (CFTC) has regulatory authority over certain prediction market contracts. In 2023 and 2024, the CFTC considered rules that would have restricted event contracts tied to political and military outcomes, though those rulemakings did not result in final restrictions on military-outcome markets. Whether the Pentagon coordinated this directive with the CFTC is not established in public reporting, and CFTC filings or interagency correspondence would be the relevant public records to answer that question.
The scope of the directive as described applies to active-duty military, intelligence professionals, and Department of Defense civilians. It is not clear from available reporting whether it extends to contractors with security clearances, who number in the hundreds of thousands according to the Office of the Director of National Intelligence's 2023 Annual Report on Security Clearance Determinations. A full copy of the directive would clarify that scope.
Hegseth's directive arrives amid broader policy debates in Washington about the growth of prediction markets and their intersection with sensitive government information. In 2025 and 2026, several prediction market operators expanded their contract offerings to include outcomes tied to specific military operations and foreign policy decisions, according to publicly available contract listings on those platforms.
From an enforcement standpoint, existing law does provide some basis for prosecution. Federal law at 18 U.S.C. Section 1905 prohibits the disclosure of confidential government information, and the Espionage Act covers certain disclosures of national defense information. Whether using such information to place a bet, as opposed to disclosing it to another party, would fall under existing statutes is a legal question that has not been adjudicated in any publicly available federal court filing as of this publication date.
What remains unknown is the full text of the directive beyond what was described by the Associated Press and CBS News, the specific penalties Hegseth's office intends to impose, whether the directive has been shared with the intelligence community's Inspector General, and whether any prior incidents involving prediction market use by personnel prompted the order. A Freedom of Information Act request to the Department of Defense for the full memo would be the appropriate mechanism to obtain those details.