Comer widens insider-trading probe into prediction markets, zeroes in on three more platforms

What's new and who's on the hook

House Oversight Chair James Comer is broadening his look at possible insider trading on prediction platforms, sending fresh requests for information to Hyperliquid Labs, Crypto.com and Aristotle Exchange Inc., which runs PredictIt. On Tuesday, the committee dispatched the letters - provided to CNBC before wider release - asking the firms to explain their identity-verification measures and their methods to detect and halt trading on nonpublic information.

Comer put it bluntly: "As online prediction platforms grow and become more mainstream, some bad actors have exploited the platforms to make thousands of dollars by placing bets based on nonpublic information." He added, "The House Oversight Committee is investigating whether these platforms are fulfilling their legal obligations and doing enough to identify and prevent insider trading before it happens."

The committee is seeking each company's know your customer, or KYC, policies, along with internal procedures for detecting, investigating and reporting suspicious activity. As of Tuesday, spokespeople for Hyperliquid, Crypto.com and Aristotle Exchange had not immediately responded to requests for comment.

The backdrop: ongoing probes and high-profile trades

This is not the committee's first foray into the space. Comer opened inquiries in May into Kalshi and Polymarket, which the committee characterizes as the biggest and most high-profile prediction markets, amid a wave of attention on wagers tied to world events. A committee spokesperson said those reviews are ongoing, with nearly 1,000 documents received and five briefings held with representatives of the two firms.

A series of headline-making trades has fueled concern. In May, The New York Times reported suspicious behavior by more than 80 Polymarket users, such as placing trades hours ahead of the U.S. and Israel striking Iran.

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There was also the case of former Rep. George Santos, a New York Republican expelled from the House in 2023. He allegedly used Kalshi to wager on whether he would attend February's State of the Union while making public statements suggesting he would be there. Kalshi permanently banned him in August and fined him $71,356. Earlier this year, both Kalshi and Polymarket announced they were strengthening their internal rules for insider trading.

A pointed example involving Hyperliquid

For everyday traders, the signal here is straightforward: Comer and the House Oversight Committee want to know how well these platforms confirm who is behind a trade and how fast they move when activity looks suspicious. That focus, along with the recent arrest, investigative reporting on suspicious accounts and platform bans, highlights that venue controls and historical track records matter when considering event-driven markets.

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