US midterms: Prediction markets favor Democrats in key crypto races

As US citizens prepare to cast their votes in the midterms on Tuesday, prediction markets are overwhelmingly forecasting a Democratic victory across key congressional races. Kalshi and Polymarket predict a 75% chance of a Democratic sweep, while traders have wagered nearly $1.9 billion on election-related contracts, marking record activity for a midterm election cycle.

On Kalshi, Democrats have a 93% chance of taking control of the House and a 75% chance of winning the Senate. Polymarket also prices those outcomes at 94.5% and 75.5%, respectively. The markets were up for sale nine days after the prediction models failed to predict Brazil's decisive presidential election, with incumbent President Luiz Inácio Lula da Silva winning the runoff.

For the cryptocurrency industry, a change in congressional control could reshape prospects for regulatory clarity. The Senate seat in Ohio is a focal point, with Defend American Jobs, a super PAC backing Senator Jon Husted, spending $36.9 million against Democrat Sherrod Brown, who receives $19.7 million in support. Traders expect Brown to win, with 72% on Kalshi and 72.5% on Polymarket, aligning with a New York Times/Siena poll that shows him leading 49% to 44%.

In Maine, a Democratic win predicted by traders could bolster the crypto industry's influence in Washington. Democrat Troy Jackson has a 71% chance of unseating Susan Collins, a Republican Senator, according to Kalshi and Polymarket, in line with New York Times polls. Jackson is seen as supportive of crypto, potentially giving the industry another ally should he win.

While many prediction markets align with polling results, they have been more definitive in three close states. In Alaska, Kalshi gives Democrat Mary Peltola a 71% chance of defeating Republican Dan Sullivan, despite a narrow 48% to 46% margin in the latest poll. Both candidates support crypto, according to Stand With Crypto.

In South Carolina, Republicans Senator Darline Graham and Democrat Annie Andrews are tied at 48% in the polls. Kalshi gives Graham a 71% chance of winning, as she is a crypto supporter. In Iowa, Democrat Josh Turek is predicted to overtake Republican Representative Ashley Hinson on Polymarket at 52%, after months of Hinson being the favored winner.

Beyond today's vote, traders are considering potential outcomes following a Democratic Congress sweep. Polymarket’s conditional markets suggest a 35% probability of a US recession by the end of 2027 if Democrats control both chambers, compared to 19% if they do not.