House Oversight Presses Crypto.com, Hyperliquid and PredictIt on KYC and Suspicious Trades

Rep. James Comer, Chair of the House Oversight Committee, has sent formal records requests to Crypto.com, Hyperliquid, and the prediction market platform PredictIt, demanding details on how each company verifies user identities, flags suspicious trading activity, and refers potential cases to U.S. regulators or law enforcement. The move signals that congressional scrutiny of crypto markets is deepening well beyond the initial targets of this investigation, with direct implications for how crypto accounting software and compliance teams document and report suspicious activity.

What the Letters Actually Ask

Each letter was tailored to the specific platform rather than being a generic questionnaire. That specificity matters: it tells compliance officers and CFOs that Congress already has a working theory about the risks at each firm, not just a broad fishing expedition.

Crypto.com: Employee Trades and Government Officials

Comer asked Crypto.com to produce records showing whether any employees or affiliates traded on contracts tied to corporate decisions they had advance knowledge of, specifically listing token listings and custody decisions as examples. The request also asks whether any current or former government officials traded on contracts linked to crypto regulations or to the exchange's own regulatory status. That second question is notable: it frames Crypto.com not just as a potential scene of insider trading but as an asset whose regulatory fate could itself be traded on.

Hyperliquid: The Pre-Tariff Short Position

The Hyperliquid letter centres on a reported large leveraged short position placed before a major U.S. tariff announcement last October. Comer asked the platform to explain how it identifies account holders and what its protocols are for referring suspicious trades to U.S. authorities. Because Hyperliquid is a decentralised exchange, the identity-verification question carries particular weight: the platform's ability to produce the records Congress is seeking will depend heavily on whether it actually collects KYC data in the first place.

PredictIt: Elections, Nominations and Nonpublic Information

PredictIt, operated by Aristotle Exchange, received questions about trades tied to elections, political nominations, and other government actions involving current or former officials. Comer's public statement framed the concern plainly: online prediction platforms have become mainstream enough that bad actors can make thousands of dollars by betting on outcomes they know about before the public does.

Context: How This Probe Evolved

Comer launched the underlying investigation in May, initially sending letters to Kalshi and Polymarket. By the time these new letters were sent in late September, the committee had already received nearly 1,000 documents and held multiple briefings with representatives from those two companies. The expansion to Crypto.com, Hyperliquid, and PredictIt is the second wave, not the beginning, and the committee's stated goal is to build an evidentiary record that could support legislation barring government officials from trading on prediction market platforms.

That legislative ambition matters for firms assessing compliance risk. Congressional probes that are building toward a bill tend to move faster and with more subpoena authority than purely investigative exercises.

AML and KYC Implications for Accounting Firms and CFOs

The specific questions Comer is asking map almost perfectly onto the AML/KYC obligations that U.S. regulators already impose, or are debating imposing, on crypto platforms. For accounting firms advising crypto clients, and for CFOs at digital asset businesses, there are several immediate takeaways.

Document Everything Your Platform Does to Flag Suspicious Activity

The letters ask for records on the tools used to detect trades that could involve nonpublic information, and for a list of referrals made to regulators or law enforcement over the past two and a half years. If your firm or client cannot produce that audit trail on demand, the gap is not just a congressional problem: it is a potential Bank Secrecy Act exposure. Any crypto business that touches U.S. customers should already be filing Suspicious Activity Reports where thresholds are met, and keeping documented records of its surveillance methodology.

Employee Trading Policies Need to Be Crypto-Specific

The Crypto.com questions about affiliate employee trades on token listing decisions translate directly into a compliance gap that many crypto firms have not yet addressed. Traditional financial services firms have had insider trading policies covering employees for decades. Crypto exchanges and platforms are still catching up. If an employee or contractor knows a token listing is coming and trades ahead of it, that is textbook material nonpublic information, and the firm's failure to have policies preventing it creates liability well beyond congressional embarrassment. Accounting firms conducting audits or agreed-upon procedures for crypto clients should be asking to see written employee trading policies as part of their work.

Decentralised Platforms Face a Particular Identity Problem

Hyperliquid's inclusion in the probe underscores a tension that crypto accounting software and compliance teams have struggled with for years: how do you produce KYC records if your platform was designed not to collect them? The committee's willingness to press a decentralised exchange on identity verification is a signal that "we are decentralised" is not a defence Congress is prepared to accept. Firms that help decentralised protocol clients with bookkeeping or tax compliance should flag this as a structural risk in any engagement letter or risk assessment.

Prediction Markets Are Now a Compliance Asset Class

PredictIt's inclusion is significant for digital asset accounting software teams tracking new asset categories. Prediction market contracts, particularly those tied to political or regulatory outcomes, are now explicitly on Congress's radar as potential vehicles for insider trading. Firms that hold or facilitate trading in these instruments need to think about how they classify and report them, and whether their surveillance systems are calibrated to flag unusual activity ahead of government announcements.

Tax Implications: What Individual Filers and Corporate Treasuries Should Know

The congressional probe does not itself change U.S. tax law, but it has indirect tax implications worth tracking.

Gains from Trades on Nonpublic Information Are Still Taxable

This sounds obvious, but it needs to be stated: even if a trade is later found to have been made on nonpublic information and becomes the subject of a civil or criminal referral, the gain is still a taxable event in the year it was realised. Penalties and disgorgement ordered by a court are generally not deductible against the original gain. Firms doing crypto tax work for clients who traded prediction market contracts or crypto derivatives around major government announcements should ensure those positions are reported correctly, regardless of how any investigation resolves.

Corporate Clients May Face Disclosure Obligations

For CFOs at publicly traded companies that hold crypto or operate crypto platforms, a congressional records request can itself trigger a disclosure analysis under SEC rules. If the request is material to the company's business or legal exposure, counsel and the accounting team need to assess whether it requires mention in periodic filings. That is a conversation to have now, not after the next quarterly filing deadline.

What Firms Should Do Now

The probe is still in its information-gathering phase, but the pattern from the Kalshi and Polymarket experience suggests the committee moves quickly once it has a document tranche in hand. Here are the practical steps accounting and compliance teams should take.

Review SAR Filing History and Surveillance Logs

Pull the last two and a half years of suspicious activity referrals and cross-check them against your surveillance system's alert logs. Any gap between alerts generated and referrals made needs a documented explanation. This is the exact period Comer's letters cover, and if the committee widens its net further, being able to demonstrate a clean audit trail is the strongest position to be in.

Update Insider Trading and Employee Trading Policies

Policies drafted for traditional securities are unlikely to cover token listing decisions, custody announcements, or regulatory status changes. A crypto-specific addendum, reviewed by legal counsel familiar with both securities law and the Bank Secrecy Act, should be a near-term priority for any exchange, broker, or platform with U.S. users.

Assess Your Prediction Market Exposure

If your firm or any client holds positions on prediction market platforms, document the basis for those positions and confirm they are captured in your trading records and tax reporting. Given the committee's stated interest in legislating restrictions on government officials, firms that act as intermediaries or liquidity providers in this space should be actively monitoring the legislative calendar.

For a deeper look at the engineering and operational side of on-chain AML surveillance, see our earlier analysis: Nine Engineering Decisions That Define On-Chain AML Screening. And for background on how reduced regulatory capacity at the SEC and CFTC affects enforcement prioritisation, our piece on SEC and CFTC commissioner vacancies and crypto oversight is directly relevant.

Frequently Asked Questions

Does a congressional records request have the same force as a subpoena?

Not automatically. A voluntary letter from a committee chair asks for cooperation but does not carry the legal compulsion of a subpoena. However, failure to respond or a perception of stonewalling can lead the committee to escalate to a formal subpoena, which does carry legal force. Most firms choose to engage proactively to avoid that escalation.

Are trades on prediction market platforms treated the same as securities trades for insider trading purposes?

That is legally unsettled and depends on how the contract is classified. If a prediction market contract is deemed a commodity future, CFTC anti-fraud rules apply. If it is classified as a security, SEC insider trading rules govern. The Kalshi litigation around prediction markets has clarified some jurisdictional questions, but the insider-trading-specifically question remains active. Firms should not assume that because a platform is a "prediction market" rather than a securities exchange, the usual insider trading framework does not apply.

What records should a crypto firm retain in anticipation of congressional or regulatory scrutiny?

At minimum: KYC onboarding records and any updates, transaction surveillance alerts and dispositions, SAR filings and the supporting evidence, employee trading pre-clearance requests and approvals, and any referrals made to FinCEN, the SEC, the CFTC, or law enforcement. A retention period of at least five years is standard under the Bank Secrecy Act, though longer retention is advisable for records that could become relevant in litigation.

How should a crypto business account for legal costs arising from a congressional probe?

Legal fees incurred in responding to a congressional inquiry are generally deductible as ordinary business expenses under U.S. tax rules, provided they relate to the firm's trade or business. However, any fines or penalties ultimately paid to a government body are not deductible. The distinction between the two is important for both tax planning and financial statement presentation.

Does the probe affect firms that only provide crypto accounting software or bookkeeping services to exchanges?

Indirectly, yes. If a software provider or accounting firm has access to client trading data, it may receive a request to produce records in a broader investigation. More practically, clients facing congressional scrutiny will require their accounting and compliance vendors to produce clean, auditable data quickly. Firms that cannot do that face reputational and contractual risk, even if they are not themselves the subject of any inquiry.

Source: The Block