Betting on War: Prediction Markets and the Corruption of National Security

Prediction markets are creating significant risks for national security by allowing individuals to bet on military and diplomatic outcomes. These platforms, such as Polymarket and Kalshi, incentivize the monetization of nonpublic information, enabling those with insider knowledge of operations to profit pseudonymously. The content cites a hypothetical U.S. operation in Venezuela and real-world suspicious trading around the Nobel Peace Prize and the war in Ukraine as examples of this danger. This financialization of conflict corrupts decision-making, creates misaligned incentives for officials, and could even encourage the prolongation of war for profit. A proposed act in Congress aims to address this by prohibiting federal officials from trading on such markets.