There are several reasons, which could be causing it - so, please read on before you fire your digitizer!

= Improper Hooping
 If the fabric hooped too tightly, it stretches the fabric and after embroidering when the fabric is removed  from the hoop, fabric tries return to original state - and in doing so faces a resisting pull and push effect from the embroidery resulting in curling up, try to loosely hoop the fabric.

I would also like to mention here, that sometimes if the grain of the fabric is not hooped perpendicular to the hoop, can also result in uneven or wrapping effect.

= Improper Backing
Backing plays a crucial role in stabilizing the fabric when its been embroidered, so check if you are using a the correct stabilizer - to read more about stablizers click here.

= Improper Underlay or density.
If the design is complex with too many overlapping objects and a high stitch count, then a very dense underlay can also cause puckering - so, reducing the density of both the underlay and the design may help - you can also try changing the stitch angle and the sewing direction.

The usual complain with embroidering on knit caps is that despite of the thickest font and increased pull compensation - it stills sews thin.

There are several ways to skin this cat - you can try to increase the density of the stitches by about 25% and use double zig-zag underlay - which is fairly easy in Wilcom Embroidery Digitizing Software.

You can also create a base or background with light tatami fill and then place the logo on it - this light tatami fill has to be sewed with same color thread as the cap to make it subtle.

You can also try using Solvy - it is something many people use on things such as fleece etc. it works extremely well on knit caps and keeps embroidery from sinking into the fabric and maintain the width of the columns.

You can also use a combination of Solvy and stick on backing - try to slightly stretch the fabric on the top with Solvy till you are happy with the layout.