The U.S. Department of Defense Plans to Ban Military Personnel from Using “Insider Information” to Bet in Prediction Markets

According to CNN, a draft of the defense policy bill released last week by the U.S. House Armed Services Committee includes a new prediction-market ban for military personnel. The measure is intended to prohibit U.S. military personnel from using prediction markets to bet on global events.

It stems from a case in which a special forces soldier violated betting rules by using confidential internal information related to activities involving the arrest of Maduro, and illegally profited $400,000.

The ban is intended to require Defense Secretary Hegseth to develop relevant regulations prohibiting members of the armed forces and Department of Defense civilian employees from engaging in prediction market trading when they possess “non-public information,” and to require them to specify clear penalties for violations.

Notably, although prediction market platforms such as Kalshi and Polymarket have continued to grow in popularity in recent years, their corresponding regulatory rules have remained relatively lagging.

However, despite existing laws prohibiting U.S. users from participating in war-related prediction markets, Polymarket’s offshore website can still be accessed via VPN and offers dozens of war-related markets.

It is this regulatory loophole that made the Maduro case the first federal prosecution for insider trading in prediction markets, in which the soldier involved illegally profited $400,000 through the platform.

Industry insiders note that while existing laws already prohibit insider trading using confidential information, the newly revised bill expands the ban to all “non-public information,” covering unpublic but non-classified information, including defense contract results.

At the same time, the Commodity Futures Trading Commission (CFTC) has also pledged to crack down on insider trading. This series of actions indicates that the government has begun taking concrete steps, though bipartisan lawmakers remain concerned about the agency’s staffing shortages.

Overall, the Department of Defense’s proposed industry-wide ban aligns with the broader trend of various government agencies tightening oversight of prediction markets. This is also another push following similar restriction measures enacted by the Senate, some members of the House of Representatives, and the governors of California and Illinois.

And the new draft bill from the Department of Defense further expands the scope of regulation, forming a comprehensive control system from federal to local levels. It also reflects the government’s continuously increasing level of concern about the potential risks of prediction markets.

# Prediction Markets