A new draft defense policy bill, released last week by the House Armed Services Committee will ban troops from using prediction markets to wager on global events should it pass the house.
The move comes after months of allegations leveled at soldiers using inside knowledge to profit via trades on event contracts through the likes of Kalshi and Polymarket.
Defense secretary Pete Hegseth required to issue regulations, should bill pass
According to the draft bill text, Defense Secretary Pete Hegseth should enact regulations barring military personnel and Pentagon civilian employees from participating in prediction market trading if they have access to relevant nonpublic information or could reasonably be expected to obtain it. Hegseth would also be in charge of developing a range of sanctions to penalise individual troops found guilty of contravening the new law.
At the beginning of the year, the military was mired in scandal after a number of trades surrounding events in Iran and Venezuela. Military personnel have rarely been prosecuted for classic securities insider trading tied directly to geopolitical events, largely because operational military information is not typically material to publicly traded stocks. However, the advent of prediction markets appears to have changed that. .
In early 2026, federal prosecutors and the Commodity Futures Trading Commission (CFTC) charged a U.S. Army soldier, Gannon Ken Van Dyke, who allegedly made more than $400,000 trading on Polymarket by using confidential government information. Authorities alleged the soldier profited from advance knowledge of a military-related operation in Venezuela, which deposed President Nicolás Maduro from power, marking one of the first major enforcement actions applying insider-trading principles to geopolitical prediction markets.
At the time, Acting Attorney General Todd Blanche said: “Our men and women in uniform are trusted with classified information in order to accomplish their mission as safely and effectively as possible, and are prohibited from using this highly sensitive information for personal financial gain. Widespread access to prediction markets is a relatively new phenomenon, but federal laws protecting national security information fully apply.”
FBI Director Kash Patel added: “Today’s announcement makes clear no one is above the law, and this FBI will do whatever it takes to defend the homeland and safeguard our nation’s secrets. Any clearance holders thinking of cashing in their access and knowledge for personal gain will be held accountable.”
Office of Management and Budget reviewing proposals suggesting CFTC regulates prediction markets
Meanwhile, a proposal that could establish federal rules for prediction markets is under review at the White House, according to a filing released last Tuesday. The measure, submitted by the CFTC, would affect platforms such as Kalshi and Polymarket, though details of the proposal were not publicly available.
The review comes as the CFTC seeks to solidify its oversight of the rapidly growing prediction market industry. Earlier this year, CFTC Chairman Michael Selig said the agency would develop a regulatory framework for the sector after withdrawing a proposal that would have barred trading on political and sports-related events.
Last week, President Donald Trump had thrown his backing behind prediction markets and the CFTC, posting on social media: ““Under my leadership, we are setting ‘rules of the road’ that are the Gold Standard for the States. We cannot have SCUM like Chris Christie, Letitia James, Tim Walz, and JB Pritzker setting the rules! Other Countries are after this new form of Financial Market, and we want to remain at the top.”
Those comments mark a stark shift from previous comments when asked on concerns about insider trading, where he said: “I was never much in favor of it. I don’t like it conceptually, but it is what it is. No, I think that I’m not happy with any of that stuff. But they have all these different sites. They have predictive markets. It’s a crazy world.”
Senators ban staff from prediction markets
In April, lawmakers unanimously approved a bipartisan rule barring senators and Senate staff from participating in prediction markets, citing concerns that lawmakers could profit from sensitive, nonpublic information. The change took effect immediately.
The measure was sponsored by Sen. Bernie Moreno, R-Ohio, and expanded to include staff through an amendment by Sen. Alex Padilla, D-Calif.
Lawmakers said the ban is a first step toward broader restrictions. Separate legislation would prohibit federal officials and employees from using insider information to trade on prediction markets.
