There is a reason professional athletes can't bet on their own sporting events or trade on prediction markets tied to their games. It's a clear conflict of interest, and it heightens the chance of insider trading or rigged athletic contests.
US military personnel may soon fall under similar restrictions on trading platforms like Kalshi and Polymarket. A draft defense policy bill is about to make its way through Congress, and if it passes, it would effectively ban soldiers from prediction platforms.
This comes in the wake of a US special forces soldier being accused of using classified information tied to the capture of Nicolás Maduro to profit on Polymarket.
Pete Hegseth Wants Soldiers Away From Prediction Platforms
A draft of a bill from the House Armed Services Committee was released last week. It includes a section directly from Defense Secretary Pete Hegseth that would ban members of the armed forces, as well as Pentagon civilian employees, from trading on certain markets on exchanges like Polymarket and Kalshi.
They wouldn't be allowed to trade on markets where they had relevant "nonpublic information" or access to classified material. If the bill is passed, Hegseth would be responsible for developing the punishments depending on the severity of the offense.
Prediction markets offer everything from sports to military actions, and they have exploded in popularity as they're now legal in nearly every state. These markets are federally regulated, and there is a rule that US-based users aren't allowed to offer war-related markets.
However, Polymarket accepts these trades offshore, and the site can easily be accessed with a VPN. There are countless war markets available to trade on when this workaround is utilized, which makes the regulatory gap that much more glaring.
Capturing Maduro Leads to Potential Reform
The capture of Maduro is the driving force behind the new bill. There are going to be more situations like this popping up, and they will lead to a lack of integrity on the trading platforms if left unchecked.
The soldier who traded on Maduro's capture allegedly made $400,000 on Polymarket. He has pleaded not guilty, and Polymarket has been fully cooperative throughout the case.
Polymarket brought the trade to the Department of Justice after recognizing that the massive win was likely aided by classified government information.
The portion of the bill may not survive the arduous process of Congressional debate, but it’s starting a necessary conversation. Polymarket and Kalshi present a lot of opportunities for insider trading, and classified information could create life-changing financial windfalls for soldiers, ruining the ethics behind prediction platforms.
Insider trading has been the primary focus of exchanges like Kalshi and Polymarket. There have been numerous red flags that have popped up regarding geopolitical events, which has fueled more desire to place limits on trading ability.
Recently, the Senate banned members from using prediction markets, and this could carry into the House of Representatives very soon. Some states like California and Illinois have signed executive orders banning state employees from trading on any market where they have inside information.
The Trade Handle Prediction Markets Take
If professional athletes can't bet on their own sporting events, military personnel should never be able to trade on any market involving geopolitical events. Soldiers and military civilians should still be allowed to utilize Kalshi and Polymarket in general, but the integrity of the exchanges immediately comes into question when they trade on any military event.
Even if they don't have access to classified information, they should be limited when it comes to geopolitical event trading.