The U.S. State Department has issued an internal directive warning diplomats worldwide against using confidential government information to profit from online prediction markets, including platforms such as Kalshi and Polymarket.
The memo states that all employees must be reminded that misusing nonpublic information for financial gain constitutes a serious offense and will not be tolerated.
This warning follows heightened concerns over prediction markets where users wager on geopolitical developments, elections, and government policy outcomes. Recent incidents include allegations that a U.S. special forces soldier used classified information to place bets exceeding $400,000 on the potential ouster of Venezuelan President Nicolas Maduro ahead of a U.S. military operation. Additionally, Polymarket accounts were reported to have placed well-timed wagers shortly before President Donald Trump announced an Iran ceasefire agreement, generating profits ranging from tens of thousands to hundreds of thousands of dollars.
Prediction markets have grown substantially since the 2024 election cycle, attracting millions in wagering on diplomacy, military conflicts, economic policy, and presidential politics. While supporters argue these platforms provide real-time measures of public expectations, critics warn that unregulated markets could pose national security and ethical risks if government officials participate using nonpublic information.
The issue has drawn bipartisan attention on Capitol Hill, with Senators Kirsten Gillibrand and Dave McCormick introducing legislation to prohibit members of Congress, the president, the vice president, and senior executive branch officials from trading on prediction market platforms including Kalshi and Polymarket.
