Crypto Faces Oversight Risk as Midterms Could Hand Democrats Congress
With Kalshi pricing a Democratic House at roughly 94%, the midterms could shift crypto policy from legislation to investigations, reset the CLARITY Act timetable and put prediction markets under scrutiny.
Control of the committees that oversee crypto is on the ballot as US voters go to the polls on Tuesday, Nov. 3, and prediction markets treat a Democratic House as a near certainty. As of Tuesday morning, Kalshi priced Democratic control of the House at roughly 94% and the Senate at roughly 75%.
All 435 House seats and 35 Senate races are being decided. Republicans enter the vote holding 219 House seats and 53 Senate seats, per the Blockchain Association's election dashboard.
Money in the races
Crypto industry groups have spent roughly $176 million across more than 100 races this cycle, according to an Oct. 27 Reuters report. Coinbase, Ripple and Andreessen Horowitz are among the main financiers of the Fairshake network, the industry's political spending vehicle.
Three contests stand out. In Ohio, Jon Husted faces Sherrod Brown, with more than $50 million reportedly spent by industry groups opposing Brown. In Nebraska, Pete Ricketts is up against Dan Osborn, with nearly $11 million of Fairshake spending for Ricketts, according to the Washington Examiner. In Texas, Ken Paxton faces James Talarico.
Legislation stalls, investigations loom
The CLARITY Act failed to advance in a 49-50 Senate procedural vote on Sept. 15, short of the 60 votes needed.
"A change in control of Congress would most likely reset the timetable for the CLARITY Act,"
Christian Davies, Relm Insurance
Others argue party control is not the core obstacle.
"The CLARITY Act was already struggling to get through the Senate with Republicans in control, so clearly the problem goes beyond which party holds the majority,"
Ryan Kirkley, Global Settlement Network
The more immediate effect of a Democratic House may be oversight rather than lawmaking. A House majority would hand Democrats control of committee investigations, with the power to hold hearings and subpoena documents or testimony. The groundwork is already laid: Sen. Elizabeth Warren and Rep. Maxine Waters asked the SEC in April 2025 to preserve records on Trump's World Liberty Financial, and Robert Garcia, the top Democrat on House Oversight, has named Trump family crypto and foreign business dealings an investigative priority.
Waters has also tied that scrutiny to recent events. In an Oct. 30 statement, she linked the Binance hack, in which roughly $6.3 billion was reportedly stolen, to Trump's pardon of Changpeng Zhao and Binance's ties to World Liberty. No connection to the hack itself has been established.
Prediction markets in the crosshairs
Prediction markets may face scrutiny too. Democrats introduced the STOP Corrupt Bets Act, which would ban contracts on elections, sports, government actions and war, according to legislation announced by Sen. Merkley. The reach of such a ban would be wide: sports and parlays made up about 84% of Kalshi volume this year, against 0.5% for elections. Kalshi has hired a lobbying firm with ties to Hakeem Jeffries.
Regulators keep moving
Agencies are acting under existing authority regardless of Congress. The SEC granted a temporary innovation exemption for onchain trading of tokenized US stocks two days after CLARITY stalled. On Nov. 3, CFTC Chairman Michael Selig announced that equity perpetual futures could begin trading on qualifying US-regulated exchanges.
What it means for markets
Because a Democratic win is largely expected, the result may already be priced in. There is also an argument that closer oversight of exchange security could ultimately help the industry, and that regulators' approvals can continue despite investigations.
Price direction may hinge on factors outside Washington. Iran could matter more: AP reported late Monday limited US strikes on Iranian targets near the Strait of Hormuz, described by a US official as defensive.
Our pre-election market report had Bitcoin near $78,462, with spot ETF outflows and history pointing to post-midterm weakness. Michael Heinrich of 0G Labs cautions that pattern is unreliable, and Kirkley agrees the vote is not the main driver.
"Bitcoin doesn't need a particular election result to succeed. It needs capital, confidence and a macro environment that gives investors a reason to take risk again,"
Ryan Kirkley, Global Settlement Network
