Congress is widening its investigation into potential insider trading on prediction markets, bringing three more platforms into a probe that started earlier this year. House Oversight Committee Chair James Comer sent letters Tuesday to Hyperliquid Labs, Crypto.com, and Aristotle Exchange, the company behind PredictIt, requesting information about how they identify users and monitor suspicious trading.
The expansion follows the committee's May investigation into Polymarket and Kalshi. Those original requests focused on whether traders could use nonpublic information for their own benefit and what systems the platforms have in place to detect questionable activity.
Congress Wants to Know Who is Behind the Trades
The new requests aren't limited to a handful of unusual transactions. Comer is looking deeper into how these companies know who their traders are and what happens when activity raises red flags.
Congress is seeking information covering several areas:
- Identity verification procedures
- Systems for detecting suspicious trades
- How questionable activity gets investigated
- Procedures for reporting activity to authorities
- Internal controls designed to prevent improper trading
That makes this as much a compliance investigation as a trading investigation. If you operate a market where new information can move prices quickly, identifying who is behind an account becomes especially important when a suspiciously timed position appears.
Hyperliquid Gets Some Extra Attention
Hyperliquid is an interesting addition because the transaction Comer highlighted wasn't actually an outcome contract. His letter reportedly points to a large leveraged short position opened shortly before an October 2025 announcement on U.S. tariff policy and questions whether the trader had information that wasn't yet public.
The investigation has not established that the trader used inside information. Hyperliquid's prediction-market-style HIP-4 outcome contracts came later, launching in May 2026, so the transaction Comer highlighted predates that product.
Kalshi and Polymarket Are Still Under Review
Adding three companies doesn't mean Congress has finished with the first two. The investigations involving Kalshi and Polymarket remain open, with the committee reportedly receiving nearly 1,000 documents and participating in five briefings involving the companies.
When Comer launched that investigation in May, the committee asked about identity verification, geographic restrictions, and systems used to identify unusual activity. It also wanted information on how platforms investigate suspicious accounts and when they refer those cases to authorities.
Insider Information is Becoming a Bigger Question
Prediction markets create an unusual challenge because finding information is central to the product. Traders are supposed to research an event, interpret information better than other participants, and take positions based on what they find.
The much harder question is what happens when someone's informational advantage comes from something the public couldn't possibly know. That becomes particularly important around government actions, military operations and other events where only a relatively small group may know what's coming.
Congress hasn't concluded that the companies named in the investigation failed to prevent improper trading. Expanding the probe to five companies, however, shows lawmakers are looking at the issue across a much broader section of the industry.
The Trade Handle Prediction Markets Take
We think insider trading is quickly becoming one of the prediction market industry's biggest growing pains. Platforms want markets to reward people who find better information, but they must distinguish between being better informed and trading on information you possess only because of privileged access.
The House investigation now stretches from Kalshi and Polymarket to Crypto.com, PredictIt and Hyperliquid. That's a much wider look at the industry than Congress was taking just a few months ago.
What comes next could matter beyond any one platform. If lawmakers decide existing safeguards aren't enough, this investigation could help shape how identity verification, market surveillance, and insider-trading rules develop across prediction markets.