The October 20 memo covers trades using classified or unclassified nonpublic information, including through third parties, and warns that violations may bring disciplinary or criminal action.
US Defence Secretary Pete Hegseth has warned department personnel against using nonpublic information to bet on prediction markets, saying the trades could reveal clues about military operations to hostile intelligence services. His October 20 memo sets out a department-wide prohibition covering financial transactions on any platform, Ars Technica reported on October 23.
Prediction markets let people trade on whether an event will happen. Polymarket and Kalshi already prohibit insider trading. Hegseth’s memo warns about prohibited conduct and possible penalties under military and federal law, rather than announcing a newly enacted law.
Hegseth said a service member, intelligence professional or civilian employee who trades on a military outcome creates a signal. Hostile intelligence services could combine those signals and connect them with other information to anticipate military movements, targets and timing, he warned. His argument describes a risk to operational security—keeping military plans from an adversary—not a finding that a particular trade enabled an intelligence operation.
He also argued that financial stakes can distort professional judgment. A logistics worker with money riding on a strike date has a personal interest in that date, he wrote, while an analyst who bets on an outcome has an interest in that outcome.
The memo applies to all department personnel and to both classified and unclassified information that is not public. It bars transactions made directly or indirectly through a third party. Its scope extends beyond prediction markets to traditional betting services and all other financial platforms.
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