Pentagon restricts military prediction market trading as Congress widens VIP inquiry

A new Pentagon directive prohibits military personnel from placing trades on prediction markets when they hold nonpublic information. In the directive, Defence Secretary Pete Hegseth cautioned that such trading risks both national security and the exposure of service members to disciplinary action or criminal prosecution. According to the Pentagon, the presence of trading activity by itself may signal details about military operations, even when no classified material is disclosed directly.

Hegseth said in the directive that adversaries observe market movements. "Our enemies watch movements in these markets," he wrote, in remarks reviewed by The Associated Press. "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 directive came after a U.S. Special Forces soldier was accused of exploiting advance knowledge of the operation to capture Venezuelan leader Nicolás Maduro. Prosecutors say the soldier earned a profit above $400,000 through Polymarket, and he was charged earlier this year. Reports in August indicated that federal authorities were examining additional suspected insider trading, among them a U.S. servicemember believed to have gained over $1 million through Polymarket wagers linked to military strikes in Iran and Venezuela.

Separately, a congressional inquiry into FanDuel's VIP programme has been extended to BetMGM, Caesars, DraftKings, Fanatics, Kalshi and Polymarket. Sen. Richard Blumenthal and Reps. Paul Tonko and Valerie Foushee sent letters on 22 October seeking details of how the companies recruit and reward high-value customers, including whether AI is used to identify and target gamblers experiencing losses. The lawmakers cited recent scrutiny of DraftKings' practices.

According to the lawmakers, the industry should not be allowed to gain from harm to the finances and mental health of its most vulnerable patrons. The companies must reply by 5 November to questions covering VIP enrolment, programme revenue, and how much customers lost on average both before and after they were granted VIP status. Lawmakers further asked if customers seeking to cut back on gambling or shut their accounts were given incentives to keep playing, and if VIP managers receive training in forming personal relationships that drive more wagering. The legislators also warned that comparable incentives are appearing on prediction markets, which they described as “actively flouting safeguards established by state gambling authorities and offering their products in states where sports betting is not legal.”