Hegseth says financial stakes can warp military judgment

Hegseth’s new directive is set out in a one-page memo dated Tuesday and reviewed by The Associated Press. CBS News had reported the document earlier.

The directive’s scope and penalties

The memo tells American service members, intelligence professionals and other Department civilians that they cannot use classified information or unclassified but nonpublic information to trade on platforms like Polymarket and Kalshi. Violators could face administrative punishment and criminal charges under the Uniform Code of Military Justice or federal law.

When asked about the new policy, a defense official said the Pentagon had no other information to offer beyond the memo.

Hegseth cites security and judgment risks

Hegseth set out operational security as one reason for the restriction. “Our enemies watch movements in these markets,” he wrote. “When an American Service member, intelligence professional, or other Department civilian engages in a financial transaction on a military outcome, they create a signal.”

The memo also addressed the possible effect of financial stakes on service members’ work. “Beyond operational security, financial stakes can warp judgment,” Hegseth wrote. “A logistician with money riding on a strike date has an interest in that date. An analyst with a position on an outcome has an interest in that outcome.”

April case and the Maduro bets

In April, federal prosecutors and federal regulators charged 38-year-old Master Sgt. Gannon Ken Van Dyke with using his access as a Special Forces member to place a series of bets totaling more than $32,500 on when Maduro might be removed from power. The directive came months after that charge.

According to the federal complaint in Van Dyke’s case, he placed those bets between Dec. 30 and Jan. 2, with the vast majority occurring on the night of Jan. 2, just hours before the first missiles would fall on Caracas. The case concerned his use of classified information about the military operation to capture then-Venezuelan President Nicolás Maduro to win more than $400,000 on Polymarket.

Betting examples beyond the Pentagon

The issue of government officials and employees using their access to place bets on prediction markets was not confined to the Pentagon. A group of new accounts on Polymarket made highly specific, well-timed bets on whether the U.S. and Iran would reach a ceasefire just before President Donald Trump announced it in April, resulting in hundreds of thousands of dollars in profits for the new customers.

The White House warned staff against using private information to trade on prediction markets the same day the report came out.

Kalshi also fined and suspended three congressional candidates who the company said wagered on the outcome of their own elections in April.