U.S. Defense Secretary Pete Hegseth has issued a strict warning to Pentagon staff against placing bets on military operations, including on the crypto-based prediction market platform Polymar
U.S. Defense Secretary Pete Hegseth has issued a strict warning to Pentagon staff against placing bets on military operations, including on the crypto-based prediction market platform Polymarket.
On Oct. 20, Hegseth sent a memorandum to senior Pentagon leadership and defense agencies. In it, he prohibited all the Department of War personnel from using nonpublic information, whether classified and unclassified, to directly or indirectly engage in financial transactions.
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The prohibition applies to all financial platforms, including traditional betting platforms and prediction markets such as Polymarket and Kalshi, the defense secretary said.
Prediction markets are online platforms where users buy and sell shares representing the likelihood of the outcome of future events, such as elections, military conflicts, or sports events.
One of the most popular of such platforms, Polymarket, is built on the Polygon blockchain network. It allows users to buy and sell contracts on future events with Circle's USDC stablecoin, a type of digital dollar.
1789 Capital, the VC fund at which the president's son Donald Trump Jr is a partner, is an investor in Polymarket. He is also an advisor at the prediction market platform.
Several event contracts on Polymarket have turned out to be very controversial.
‘People are putting money behind the outcome’ — Polygon CEO on Polymarket (4:35)For instance, the Department of Justice arrested and charged a U.S. Army soldier in April for allegedly using non-public information to bet on the abduction of former Venezuelan president Nicolas Maduro.
The soldier engaged in insider trading by using classified information on the U.S. operation in Venezuela to place $33,000 in 13 Polymarket contracts and pocket $400,000, the DoJ alleged.
Once he won the bets, he withdrew the funds, converted them to a bridged version of USDC, transferred them to a foreign crypto vault, and began moving them into a brokerage account, the department further alleged.
A recent Reuters/Ipsos opinion poll revealed that 65% of Americans are opposed to prediction market betting on U.S. military actions.
Though crypto transactions are indeed anonymous to a certain extent and several people use crypto to evade law enforcement, a competent agency can still trace the movement of funds back to the bank account and find out the identity of the crypto users.
In his memo, Hegseth warned that personnel violating these prohibitory rules could face administrative, disciplinary and, criminal action under the Uniform Code of Military Justice and/or applicable federal law.
He explained that a U.S. officer engaging in these prediction markets could end up sending a signal on the movement, timing, or target of a military action to the adversaries and put the lives of American soldiers at risk.
An officer with money riding on a particular outcome has an interest in that outcome and that financial stake can warp their judgement, he added.
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