Prediction Markets Signal Democratic Victory in Crucial Cryptocurrency-Related Midterm Contests
Both Kalshi and Polymarket indicate a 75% probability of Democrats controlling both chambers, following recent miscalculations regarding Brazil's electoral runoff.
With Americans nationwide casting ballots in the US midterm elections on Tuesday, prediction market participants have dedicated months to placing bets on the electoral results. Based on data analyzed by The Washington Post, approximately $1.9 billion worth of election-focused contracts had been executed on Kalshi and Polymarket through Monday, representing unprecedented trading volumes for a midterm electoral period.
Trading platforms on both services show Democrats as favorites to secure congressional control, with the probability of a Democratic sweep standing at 75% on Kalshi and 75.5% on Polymarket as measured at 4:30 p.m. UTC. On Kalshi, traders assigned Democrats a 93% probability of capturing the House and a 75% likelihood of securing the Senate, whereas Polymarket assigned probabilities of 94.5% and 75.5% to these respective outcomes.
The election occurs nine days following prediction markets' failure to correctly forecast the results of Brazil's presidential contest, where Flávio Bolsonaro was favored at approximately 80% the day prior to sitting President Luiz Inácio Lula da Silva securing victory in the runoff. According to CNBC, Kalshi CEO Tarek Mansour purportedly warned that "a 5% probability doesn't mean it won't happen."
For those involved in the cryptocurrency sector, any change in congressional leadership could significantly alter the outlook for much-anticipated regulatory guidance.
Super PAC Expenditures May Prove Insufficient in Ohio
An especially significant race for the crypto sector has revolved around Ohio's Senate position, where Defend American Jobs, a component of the Fairshake super PAC coalition, directed 54% of its overall expenditures. Based on information from the official website, $36.9 million was invested in backing Senator Jon Husted and $19.7 million in campaigning against vocal crypto-opponent, Democrat Sherrod Brown. Fairshake invested $40 million in the effort to remove Brown from office in 2024.
Nevertheless, the substantial financial outlay may prove futile, as traders anticipate a Brown victory. The Kalshi marketplace for this contest forecast a 72% probability of a Brown triumph and 72.5% on Polymarket, both consistent with a concluding New York Times/Siena survey that positioned him in the lead 49% to 44%.
Should Brown emerge victorious, it could present obstacles to the crypto sector's legislative priorities, especially if Democrats recapture Senate control. Industry analysts have suggested him as a prospective chairman of the Senate Agriculture Committee, which provides oversight for the Commodity Futures Trading Commission, though the leadership role remains undecided.
A Cryptocurrency-Friendly Transition in Maine
In Maine, conversely, a Democratic victory as forecast by traders might enable the crypto sector to broaden its Washington influence. Republican Senator Susan Collins represented one of four Republicans who cast votes against proceeding with the CLARITY Act in September, thereby blocking the legislation in the Senate.
Kalshi attributes Democrat Troy Jackson a 71% probability of displacing her, whereas Polymarket estimates his odds at 71.5%, generally aligned with New York Times surveys from October that positioned Jackson with a two percentage point advantage. The advocacy organization Stand with Crypto characterizes Jackson as firmly pro-crypto, potentially providing the sector with an additional supporter in the Senate if he prevails.
Forecasting the Close Contests
While numerous prediction markets align closely with polling data, traders have rendered more definitive predictions in three states where surveys indicate extremely tight races.
In Alaska, Kalshi assigns Democrat Mary Peltola a 71% probability of overcoming Republican Senator Dan Sullivan, despite the concluding New York Times/Siena survey showing her leading by merely two percentage points, 48% to 46%. According to Stand With Crypto, both contenders have demonstrated robust support for cryptocurrency.
In South Carolina, where the New York Times/Siena poll showed the candidates deadlocked at 48%, Kalshi assigns Republican Senator Darline Graham, who supports cryptocurrency, a 71% probability of prevailing over Democrat Annie Andrews.
Iowa continues to be highly competitive on both platforms, with Democrat Josh Turek surpassing Republican Representative Ashley Hinson on Polymarket at 52%, following months during which Hinson had been projected to win.
In additional critical races, prediction markets demonstrate broad consistency with polling results. In Michigan, Kalshi assigns Democrat Abdul El-Sayed a 79% probability of overcoming Republican Mike Rogers. Kalshi additionally assigns Democrat James Talarico a 71% probability of prevailing over Republican Ken Paxton in Texas, while the concluding New York Times/Siena poll positioned Talarico in front 50% to 43%. A defeat for Paxton would represent a disappointment for the Digital Freedom Fund, a super PAC supported by Gemini's co-founders Cameron and Tyler Winklevoss that invested over $81,000 in supporting his candidacy. Nevertheless, Talarico has similarly voiced support for the cryptocurrency sector.
Trader Expectations Following a Complete Democratic Victory
Markets are beginning to project beyond today's voting to analyze the political and economic environment following a possible Democratic takeover of Congress. Polymarket's conditional markets indicate traders are calculating an elevated recession risk under Democratic command of both legislative chambers, with the projected probability of a US recession by the conclusion of 2027 standing at 35% in the event Democrats sweep and 19% if they fail to do so, as measured at 4:50 p.m. UTC.