Government Insiders Must Be Prevented From Profiting on Prediction Markets at the Expense of National Security

In the week before the Trump administration’s January 3 capture of Venezuelan dictator Nicolás Maduro, a U.S. Army special operations soldier has been alleged to have placed roughly $33,000 across 13 wagers on the online prediction market site Polymarket, all on Maduro- and Venezuela-related contracts. The Department of Justice has indicted Master Sergeant Gannon Ken Van Dyke, claiming that he won every bet he placed because he had classified knowledge of the operation. The Department of Justice alleged that he cashed out at more than $400,000 within hours of Trump’s announcement. Although these remain allegations, wagers in the following months raised further suspicions of trading on classified information. Two months after the Maduro abduction, six anonymous Polymarket accounts bet on the date that the United States would strike Iran and made about $1 million in aggregate. On April 7, despite ongoing inflammatory rhetoric from the president, at least 50 newly formed anonymous accounts bet on a U.S.-Iran ceasefire in the hours and minutes before Trump announced a pause in hostilities. One wallet opened just 12 minutes before Trump’s Truth Social post and earned a profit of $48,500.

These bets are part of a broader trend where growing numbers are using prediction markets: internet-based platforms that allow users anywhere to make bets, often anonymously, on the outcomes of real-world events. Global prediction market activity on the two leading prediction markets, Polymarket and Kalshi, increased from less than $5 billion in September 2025 to about $24 billion in April 2026. Global prediction market trading in the first quarter of 2026 was roughly 40 percent larger than it was for all of 2025.

But along with this exploding popularity are increasing concerns about the potential for abuse in prediction markets. Individuals with apparent access to insider government information (including classified information) are alleged to have placed well-timed, anonymous bets about sensitive government activity—even activity crucial to U.S. national security. Essentially, prediction markets advantage those who seek to use insider knowledge to unfairly profit at the expense of unknowing counterparties in those bets. Prediction markets have turned access to sensitive information into potential windfalls for anonymous insiders, becoming an effective vehicle for government corruption. Congress and the executive branch must act now to prevent government insiders from using prediction markets. Without regulation, these markets are not only unfair but are also an emerging venue for corruption that both threatens national security and fundamentally undermines the American public’s trust in their government.

Prediction markets are digital platforms where anyone can bet on the outcome of a wide range of real-world events, such as an election, economic indicator, military action, or private-sector announcement. As long as a person making a bet has someone on the other end of the screen willing to take the opposing position, they can gamble on just about anything. The platforms themselves make money from transaction fees, not from the bets themselves, and do not take a position on the actual event, giving them a financial incentive to maximize trading volume rather than to ensure fair play. These markets facilitate anonymity, allowing users to place massive wagers under pseudonyms without ever revealing their real identities to the public or their trading counterparties. This layer of anonymity obscures who is moving the market, making it easy for corporate insiders, political operatives, or high-net-worth individuals to place massive bets without public exposure. Furthermore, since many of these platforms operate globally or outside the U.S. banking system, they can circumvent traditional “Know Your Customer” regulations and enable users to obscure their financial footprints from legal scrutiny.

These platforms emerged partly as an alternative to state-regulated sports gambling apps, which are subject to strict licensing and consumer protection restrictions under most state laws. Prediction market platforms, such as Kalshi and Polymarket, avoid state laws by framing prediction market bets as event contracts subject to the exclusive jurisdiction of the Commodity Futures Trading Commission (CFTC)—a federal agency that oversees the trading of commodities and derivatives, such as futures, options, and swaps. Derivatives are sophisticated financial instruments whose price depends upon the value of an underlying security, debt instrument, index, or other agreed-upon arrangement.

Trump-appointed CFTC Chair Michael S. Selig has defended prediction markets as legitimate future event contracts subject to the agency’s exclusive authority under the Commodity Exchange Act. However, courts determine whether contracts listed on commodity exchanges are commodity derivatives subject to the commission’s exclusive jurisdiction. Through the Commodity Exchange Act, Congress intended to regulate the trading of commodity derivatives usable by economic actors to hedge their risks, that is, to offset an opposing economic risk that the trading party faces, and experts disagree on the extent to which prediction market bets can be used for this purpose. Many experts also question the CFTC’s expertise and capacity to oversee growing prediction markets, including policing the difficult-to-detect use of insider information, especially since it is a small agency that has little history regulating financial products that are traded by ordinary Americans. Sen. Adam Schiff (D-CA) has said that the CFTC was “‘completely unequipped’ to regulate prediction markets” even before its staff was severely cut back during the second Trump administration.

Lack of regulation and the ability of bettors to remain anonymous make it significantly easier to profit from inside information in prediction markets than in conventional financial markets. Unlike stock trading, where suspicious activity around major announcements routinely triggers regulatory scrutiny, prediction market transactions involve fast-moving, high-volume transactions that are difficult to trace and nearly impossible to reverse. Opaque counterparties and layered accounts obscure transactions and make tracing even more difficult. Offshore prediction market platforms, such as Polymarket’s primary crypto-based platform—which operates beyond normal U.S. jurisdiction—offer further means of avoiding scrutiny and legal restrictions. In advance of both the Trump administration’s military actions to abduct Maduro on January 3 and to strike Iran on February 28, anonymous users made bets on Polymarket using accounts opened hours before the respective events.

Van Dyke—who was involved in the planning and execution of the military operation to capture Maduro—has been charged with multiple felonies for using classified information to make Polymarket bets about U.S. military action. However, the allegations leveled against Van Dyke may account for just one out of many suspicious trades made ahead of the Maduro raid and similar military operations. The prediction market platforms do not require registered brokers to trade an event contract or impose disclosure requirements on traders, and there are limited oversight mechanisms to flag the suspicious trades.

The lack of transparency is not a loophole but a feature of the system itself, making prediction markets uniquely dangerous in the hands of government insiders. A federal employee or defense contractor with foreknowledge of a military operation, a regulatory decision, or a policy announcement can place a bet worth hundreds of thousands of dollars with minimal risk of detection. The mere placing of a bet could also reveal sensitive information, regardless of the outcome of the bet. The opportunity to get away with insider betting is compounded by uncertainty about the application of existing insider trading laws. In short, government insiders with access to sensitive information have the most to gain from betting on prediction markets and, because their anonymity is protected, very little to lose in doing so.

The potential corruption risks compound even further in light of the breadth of what can be wagered on. Platforms have hosted contracts on nearly every conceivable government activity, including whether the president will sign an executive order within a given week, who will be named Fed chair, and whether the federal government will shut down. A litany of bets placed on agency decisions, legislative outcomes, or military actions are all currently available and live on these sites. Although Kalshi restricts some types of bets, specifically banning contracts on war, terrorism, assassinations, and gaming pursuant to CFTC regulation 17 CFR § 40.11, there are otherwise almost no restrictions on what sorts of bets can be made on U.S. prediction market platforms—and even these restrictions do not apply to offshore platforms like Polymarket where Van Dyke is alleged to have placed his bet. Worse yet, for those in decision-making roles, the profit potential presents serious conflicts of interest, where government insiders could profit from making decisions that win bets, even if these decisions are not in the best interest of the American people or U.S. national security.

The potential dangers of using inside government information to place bets are perhaps most acute through the lens of national security. Classified decisions about troop movements, intelligence operations, defense procurement, or foreign policy decisions are all sensitive pieces of information that flow through dozens or perhaps hundreds of staffers, contractors, and supporting personnel across multiple government offices and agencies. Any one of those individuals along the chain could log on to a prediction market on their phone and place an anonymous bet from advance knowledge of these classified developments, using a cloak of anonymity to shield themselves from prosecution. The Department of Justice has alleged that Van Dyke had used a personal email address for his Polymarket account but later attempted to change to an email address not attached to his name.

Foreign intelligence agencies are almost certainly watching these markets for unusual spikes in activity. Advance bets placed ahead of major foreign policy or defense announcements, like a new trade deal or a weapons acquisition, would allow insiders to profit while having adverse impacts on U.S. foreign policy, potentially tipping off U.S. adversaries to events before they occur. Even more concerning, bets placed around specific military or intelligence actions—such as around when military strikes may take place—can directly put American service members at risk.

Securities insider trading rules apply to securities—stocks, bonds, and related instruments. Prediction market contracts are not explicitly mentioned, and insider trading on prediction markets is more difficult to prove than insider trading of traditional securities. The CFTC claims it should regulate prediction markets, but its own rules about insider trading do not mention prediction market bets and may not fit prediction market contracts. In addition, the agency’s oversight of trading exchanges (known as designated contract markets), presumably including prediction markets, is weak at best.

The STOCK Act addresses insider trading by government officials. It prohibits members of Congress and federal employees from trading on material nonpublic information, but its application to prediction market wagers is legally uncertain.

Meanwhile, states have historically had jurisdiction over gambling: establishing gaming commissions, placing guardrails around where, how, and by whom betting can take place, and raising revenue from taxes on gambling businesses. States also have a strong interest in protecting their citizens from the negative effects of gambling, including the well-documented addiction to gambling especially among young men.

States have established comprehensive state licensing regimes for gambling businesses, which include background check requirements for casino operators and their employees, internal controls for handling physical money and tracking digital transactions, and reporting obligations to ensure operational integrity, consumer protection, and transparency. Stock and bond markets operate under layers of federal and state regulation, with robust transparency requirements, mandatory broker registration, active exchange surveillance, and well-resourced enforcement agencies. Prediction markets, which have many similarities to the gambling industry, are not subject to either set of protections, and the outcomes are often ripe for insiders to exploit. The CFTC, which claims to regulate these markets, can bring enforcement actions for fraud and manipulation, assuming it is aware of it, but one-off enforcement actions could be ineffective at stopping anonymous insider trading that goes undetected.

The use of government information to place prediction market bets for personal profit is a violation of the trust that American citizens place in their government. Both Congress and the president have some authority to address the use of inside information to profit on prediction markets.

Steps Congress should take

Already, the U.S. Senate passed a binding resolution banning all senators and their staff from participating in prediction markets. Given the potential harms to national security and the uncertainty about the application of existing insider trading statutes to prediction market bets by government officials and employees, Congress should take the following actions:

1. Prohibit federal employees and military personnel from betting on prediction markets, without exception. Congress should pass legislation to bar federal elected officials, political appointees, executive branch employees, and congressional staff and other employees from buying, selling, or engaging with prediction market bets on any topic, including sports. Congress should draw the definition of “insider” broadly to include contractors involved in military and intelligence operations, who often have access to classified information. The contractor ban should only apply to government contractors with clearance and could be implemented through the security clearance process. The federal government has broad authority to set conditions on federal employment and contracting, especially in positions involving security clearances or to ensure that the position is not used improperly for private gain.
2. End anonymous betting. To aid in enforcement of the above prohibition, Congress should require all prediction market companies to collect, verify, and retain basic identifying information—name, age, contact information—from anyone placing a bet on their platforms. Mandatory identity verification would raise the cost of insider trading and discourage bad actors. Anyone placing a bet also should be required to state whether they are a government employee or contractor.
3. Amend the STOCK Act to prohibit insider trading on prediction markets. Congress should update the STOCK Act to explicitly cover prediction market wagers, removing any legal ambiguity and creating a clear enforcement hook with meaningful criminal penalties.
4. Enact penalties for any platform that enables violations. Domestic platforms that knowingly allow government insiders to bet on covered markets should face stiff penalties, including disgorgement of fees associated with illegal bets. International platforms, while harder to regulate, could be dissuaded by the threat of exclusion from U.S. markets and criminal liability, which can deter bad actors.

Steps the president should take

The president has said he wants prediction markets to “thrive,” and he and his son Donald Trump Jr. have financial ties to the industry. He is unlikely, therefore, to take action to rein in prediction market wagering. But, if he wanted to, he could take immediate action to prevent military personnel and federal employees’ use of classified information to profit on prediction markets. The Van Dyke charges related to prediction market profiting from classified information expose the clear national security concerns that unregulated prediction market platforms pose. The president has broad powers to regulate the actions of the military and federal executive branch employees under separate authorities that could be applied to prohibit participation in prediction markets.

1. General order banning bets by active-duty service members. The president could, by executive order, direct the Department of Defense to issue a general order prohibiting active-duty service members from participating in prediction markets in any capacity. However, the president does not have the explicit authority to amend the Uniform Code of Military Justice to create a new offense, instead having only the power to prescribe procedural rules for military courts-martial through 10 U.S.C. § 836. As such, any order prohibiting prediction market engagement would need to be couched under that authority by introducing new or clarifying existing regulations to explicitly prohibit trading in event contracts and prediction markets. However, it may remain difficult to prosecute military personnel under catch-all UCMJ provisions like Article 134 for conduct prejudicing good order and discipline or bringing discredit to the armed forces because the question of whether event contracts and prediction markets are subject to exclusive CFTC jurisdiction is still being litigated.
2. Executive order banning bets by senior executive branch appointees and civil service employees. The president has the authority to proscribe certain actions of the federal workforce through executive order so long as it is connected with underlying statutory powers. Such a directive could certainly apply to senior executive branch appointees, and likely to lower-level personnel, though not as sweepingly. Title 5, U.S.C. § 3301 provides the president the authority to “prescribe such regulations for the admission of individuals into the civil service in the executive branch as will best promote the efficiency of that service” and “ascertain the fitness of applicants as to … character.” Similarly, 5 U.S.C. § 7301 allows the president to “prescribe regulations for the conduct of employees in the executive branch.” Also, 18 U.S.C. § 208 makes it a federal crime for employees to participate substantially in official matters that will directly affect their personal financial interests.

   A broad directive prohibiting all participation in prediction markets, however, would likely be challenged in court and potentially overturned as prediction markets are regulated under the CFTC, and could be considered a prohibition on property rights in exchange for employment and thus not pass constitutional muster. The blanket prohibition could also be challenged under First Amendment or due process considerations as it influences the private actions of individuals in their off-duty hours. Such an executive order would be on the strongest legal footing by directing a total ban on the highest-level appointees to maintain the reputation of the government, and a ban on using insider knowledge to the remainder of the federal workforce, as similar prohibitions already exist.

3. Amend existing executive orders to specifically prohibit participation in prediction markets. An executive order prohibiting participation in event contracts and prediction markets could reasonably be crafted to land within these statutory authorities. Indeed, Executive Order 12834, “Ethics Commitments by Executive Branch Appointees,” lays out foreign lobbying prohibitions for senior officials. Executive Order 12674, “Principles of Ethical Conduct for Government Officers and Employees,” prohibits federal employees from engaging in “financial transactions using nonpublic Government information or [allowing] the improper use of such information to further any private interest.” Either of these executive orders could be amended to include prohibitions on participating in prediction markets, especially as it pertains to confidential government information.
4. Make a prediction market prohibition part of security clearance requirements. The wide range of prediction market bets offers a dangerous incentive for those with access to classified information. Personal conduct including gambling debts is already a factor for security clearance adjudication. Due to the national security risk of trading on these markets and the leverage that participating traders may find themselves in, the current or a future administration could prohibit anyone who holds a security clearance from betting on prediction markets.
5. Federal employee and contractor education. The president should ensure that all federal employees and contractors and military personnel are educated about federal legislative and executive restrictions on prediction market betting.

Given the importance of protecting confidential government information—both from its use for personal profit and, even more critical, from disclosure to bad actors—Congress and the president should consider all of these steps.

The actions recommended above would have meaningful benefits beyond the immediate safeguarding of U.S. insider information. A federal ban would also provide a model for private-sector corporations to adopt similar policies for their own employees as well as for other governments worldwide. The latter is important because global cooperation will be critical to closing gaps in enforcement where bets occur on offshore platforms outside of U.S. jurisdiction.