Prediction markets tilted heavily toward a Democratic sweep of Congress on Nov. 3, the day of the U.S. midterm elections, as polling places began to close across the country.
Polymarket’s afternoon pricing implied a 76% chance that Democrats would retain control of the Senate and a 94% chance that they would win the House. Kalshi showed almost identical numbers: 75% for the Senate and 94% for the House.
Control of Congress would shape the next two years of lawmaking
This election will decide all 435 seats in the House of Representatives and 35 of the 100 seats in the Senate. If the market’s pricing proves correct, investors are effectively saying Democrats will control Washington’s legislative agenda for the next two years. In the report, that was described as the election outcome with the most direct implications for the crypto industry.
Prediction markets surged into the spotlight during the 2024 presidential election, when they were frequently compared with national polling as an alternative gauge of public sentiment. Polymarket and Kalshi later posted sizable revenue gains and saw their valuations climb. According to the report, both platforms had already been pointing to a Democratic sweep well before election day, with the day’s pricing serving mainly as confirmation.
Political contract activity has cooled sharply
Clear market direction has not translated into the same level of trading intensity. Citing Bloomberg-compiled statistics, the report said political contracts made up only 1% of trading volume on Kalshi and Polymarket in October, far below the more than 60% seen during the 2024 presidential election period. Both participation and capital committed to election wagers were down sharply from two years earlier.
The shift suggests that growth in prediction markets is moving elsewhere. Robinhood’s prediction market business was cited as one example: contracts tied to price moves in Bitcoin, gold and crude oil have become its fastest-growing products. In September, the platform’s largest contract was not tied to a sporting event but to a Federal Reserve rate decision. Settlement cycles for crypto contracts have also been compressed from one week or one day to as little as 15 minutes.
That change does not mean traders have left prediction markets. Instead, the report said, they have moved capital away from politics and toward finance and sports. Sports contracts, however, are still facing litigation risk under state-level gambling rules.
A Democratic Congress could bring committee changes and tougher scrutiny
For crypto, the most immediate consequence of a shift in congressional control would be committee leadership. If Democrats control both chambers, key committees would be chaired by Democratic lawmakers and their agendas would be set accordingly. The report named Senator Elizabeth Warren, who has long taken a hard line on digital assets, and former Senator Sherrod Brown as figures who could move to the front line of oversight.
Several experts interviewed for the report said the next phase is more likely to bring more oversight than more legislation. Controversies including World Liberty Financial, the crypto business tied to the Trump family, could be placed on hearing agendas, while crypto legislation itself could move lower on the priority list.
That view echoes comments made in February by U.S. Treasury Secretary Scott Bessent. At the time, he said that if Democrats took the House, the outlook for crypto legislation would be 「completely dead」.
Key state races are also drawing attention
The report also highlighted pricing in several closely watched races. In Ohio, incumbent Senator Jon Husted is facing former Senator Sherrod Brown, described in the report as a crypto critic. On Kalshi, Brown was priced at a 71% chance of winning. In New Jersey, Senator Cory Booker, who has played a major role in crypto legislation, was given a 98% chance on Kalshi.
The platforms backing a Democratic win may face a less friendly Congress
The report pointed to an irony in the current setup. Prediction markets are pricing in a Democratic sweep, yet some of the strongest political pressure on prediction markets also comes from Democrats. It said Nancy Pelosi and 30 Democratic lawmakers have backed legislation that would bar U.S. officials from betting on prediction markets, while sports contracts continue to face lawsuits under state gambling laws.
If Democrats do take both chambers, pressure for tighter federal rules on prediction markets could increase. That would matter especially for Kalshi, which has promoted its federal regulatory path while also fighting lawsuits in multiple states and would benefit from a clearer rulebook out of Washington.
Crypto spending may buy defense, not legislative gains
The report said the political timetable now looks more constrained for the crypto industry. In February, only 47% of traders on Polymarket were betting on a divided Congress. By election day, the probability of Democrats winning the House had climbed to 94%, showing that the market’s pricing of a Washington gridlock scenario had shifted sharply over nine months.
That backdrop matters when set against more than $170 million in political spending during this election cycle. The largest single outlay by political action committees including Fairshake, more than $60 million, was aimed at blocking Brown from returning to the Senate. Even if that spending translates into seats, the report said, the likely result is defensive room against hostile legislation rather than a fresh wave of legislative upside.
Two issues now stand out
The report closed with two points to watch. First, if Democrats win the House, prediction markets may have to deal with congressional pressure from their own side of the aisle before they can hope for a looser federal framework, with the legal path for sports contracts serving as a direct test. Second, whether Polymarket and Kalshi can keep shifting their revenue mix from political contracts to financial ones may determine whether they can move beyond a business model that peaks only in election years.
