In the short term, the U.S. midterm elections may trigger early pricing of market expectations and reverse fluctuations after the election results are announced; the long-term impact will depend on the actual implementation of crypto regulatory policies after the election, as well as institutional capital inflows and real business growth in the industry.
Author: CoinW Research Institute
Abstract
On November 3, 2026, the U.S. midterm elections will become an important variable affecting the direction of Crypto regulation over the next two years. The GENIUS Act has already been implemented, but the CLARITY Act remains constrained by congressional divisions, and the crypto industry's massive political spending has not eliminated legislative resistance. The core impact of this election is not determining a Crypto bull or bear market, but changing the pace of regulatory reform and market expectations. Continued Republican control of both chambers is conducive to policy continuity, while divided government or Democratic control of both chambers may increase legislative resistance, but the impact on different assets will diverge markedly. BTC relies more on macro liquidity and ETF flows, while DeFi, stablecoins, and trading platforms are more sensitive to regulatory changes. In the short term, the U.S. midterm elections may trigger early pricing of market expectations and reverse volatility after the election results are announced; the long-term impact depends on the actual implementation of crypto regulatory policy after the election, as well as institutional capital inflows and real business growth in the industry.
1. Why have the midterm elections become an important variable for Crypto?
On November 3, 2026, the United States will hold midterm elections, with all 435 House seats and 35 Senate seats up for re-election. Unlike presidential elections, the midterm elections will not change Trump's status as president, but they may change Republican and Democratic control of Congress, thereby affecting the advancement of U.S. crypto regulatory policy over the next two years. Why is congressional control so important for Crypto? Major U.S. crypto regulatory bills usually need to pass both the House and the Senate before they can be sent to the president for signature. The House is responsible for reviewing, amending, and voting on bills, while the Senate conducts further review and voting. Take the CLARITY Act as an example: the bill passed the House in July 2025, but in September 2026 it failed to cross the procedural vote threshold in the Senate. Even if the president supports Crypto, as long as Congress cannot form sufficient consensus, relevant regulatory reform may still stall.
The influence of the two chambers also differs in emphasis. A change in House control may affect the legislative agenda for crypto bills, budget arrangements, and the intensity of investigations into regulatory agencies; a change in Senate control may affect the advancement of bills and the appointment of senior officials at regulatory agencies such as the SEC and CFTC.
Particularly noteworthy is that most ordinary legislation in the Senate usually requires 60 votes to end debate, rather than a simple majority. Therefore, even if a party holds a majority of seats, it may not be able to advance crypto legislation on its own. Currently, Republicans control both the House and the Senate, with 53 Senate seats. If the midterm elections change control of one or both chambers, Congress's legislative agenda and the pattern of policy negotiations may also adjust accordingly.
What this election truly affects is the pace and stability of U.S. Crypto regulation over the next two years, as well as the market's judgment on whether relevant policies can be implemented.
Figure 1. How U.S. midterm elections affect Crypto regulation. Source: CoinW Research Institute
2. Before the election, where had U.S. Crypto regulation reached?
To understand the impact of the midterm elections on Crypto, it is first necessary to distinguish between laws in U.S. crypto regulation that have already been implemented and reforms still under negotiation in Congress. The former mainly faces subsequent implementation issues, while the latter may be directly affected by changes in congressional control. The GENIUS Act and the CLARITY Act precisely reflect this difference.
In July 2025, Trump signed the GENIUS Act, establishing a federal regulatory framework for U.S. payment stablecoins. The bill requires compliant issuers to hold at least 1:1 qualifying reserve assets, including U.S. dollar cash, short-term U.S. Treasury securities, and others, and clarifies redemption, disclosure, and regulatory requirements. This provides a clearer legal basis for stablecoin issuers, banks, and payment institutions to conduct related businesses. Since the GENIUS Act has become law, the midterm elections will not cause it to automatically lapse, but the new Congress may influence the subsequent policy direction through oversight, hearings, or amendments.
However, the passage of a law does not mean all disputes have been resolved. Whether stablecoins can offer yields to users through third-party platforms, whether they will divert traditional bank deposits, and how banks will participate in related businesses remain points of disagreement. The relevant implementing rules are mainly formulated by regulatory agencies authorized by law, and changes in congressional control may affect subsequent oversight priorities and the scope for policy adjustment.
Compared with stablecoins, the broader U.S. crypto asset market still lacks a unified regulatory framework. The CLARITY Act attempts to clarify which tokens are securities and which are digital commodities, as well as what the SEC and CFTC are respectively responsible for regulating, while providing clearer compliance rules for trading platforms, DeFi protocols, and developers.
Unlike the GENIUS Act, which has already become law, CLARITY has not yet completed the legislative process and is therefore more susceptible to the outcome of the midterm elections. On September 15, 2026, the Senate held a procedural vote on a motion to end debate on the relevant topic and proceed to subsequent voting. The result was 49 in favor and 50 against, falling short of the usual 60-vote threshold. This vote was on a cloture motion, not the final vote on the CLARITY Act itself, yet it exposed the political resistance facing regulatory reform. Some Democratic lawmakers demanded stronger consumer protection, anti-money laundering measures, and restrictions on conflicts of interest involving the crypto businesses of government officials and their families; some Republican lawmakers also had differing views. At the same time, the banking industry is concerned that stablecoin yield products will divert traditional deposits and affect banks' funding sources.
The difficulty of CLARITY has gone beyond the division of authority between the SEC and CFTC and also involves coordination of interests among crypto companies, traditional banks, and different political groups. After the midterm elections, whether Congress can rebuild sufficient support will directly affect the prospects for advancing this reform.
Even if congressional legislation is blocked, the Trump administration can still adjust rule interpretations, enforcement priorities, and regulatory approaches through regulatory agencies such as the SEC and CFTC within the scope of existing legal authority, providing a relatively clear operating environment for crypto businesses. However, administrative policy may face judicial challenges and may also be adjusted with future changes in government or regulatory leadership, and its long-term stability is usually weaker than a clear legal framework. Therefore, the key impact of these midterm elections on U.S. Crypto regulation lies in whether already passed laws can be implemented smoothly and whether the unfinished market structure reform can continue to advance. Changes in these two aspects will affect the regulatory environment and development expectations of the U.S. crypto industry over the next two years.
3. Crypto political funding and regulatory gaming in the U.S. midterm elections
The obstruction of the CLARITY Act made crypto companies realize that support from the president or regulatory agencies alone is not enough; whether there are enough lawmakers in Congress willing to advance relevant legislation is equally important. Therefore, the Crypto industry has begun to invest more funds in U.S. elections in recent years, hoping to secure a policy environment more conducive to industry development. According to Public Citizen's analysis of data from the Federal Election Commission and other sources, as of the second quarter of 2026, crypto companies had provided approximately $206 million to relevant political committees in this election cycle, exceeding the approximately $170 million in corporate political donations in the 2024 election cycle.
Companies and investment institutions such as Coinbase, Ripple, and a16z are important participants, while Fairshake is one of the industry's main political funding platforms. Fairshake is a Super PAC, which can raise large amounts of funds and support or oppose candidates through independent advertising and other means, but cannot directly provide unlimited donations to candidates, nor can it coordinate these independent expenditures with candidates' campaign teams. For ordinary readers, it can be understood as the crypto industry expressing which policy positions it hopes to support through legal campaign finance channels.
Why are crypto companies willing to spend so much money? Because the rules set by Congress may directly affect what businesses they can conduct in the future. Exchanges want clear rules for token listing and trading, stablecoin companies care about the development space for payment and yield businesses, and DeFi projects want to clarify developers' legal responsibilities. The higher the regulatory uncertainty, the greater the resistance companies usually face in expansion, financing, and product innovation. It is worth noting that the Crypto industry has not bet its political support entirely on the Republican Party, but has tried to win support from lawmakers in both parties who support crypto policy. This is related to the U.S. legislative mechanism: regardless of which party controls Congress, major reforms often still require bipartisan cooperation. However, political funding can increase the industry's opportunities to express its demands, but it cannot guarantee that candidates will be elected, nor can it directly determine whether a bill will pass. These midterm elections will test whether this political spending can be translated into more stable congressional support.4. From political changes to BTC prices: how do elections affect the crypto market?
The previous section discussed regulatory bills and industry political spending, but for investors, the bigger concern is whether the midterm elections will affect the prices of crypto assets such as BTC and ETH. The election results themselves will not directly change the supply and demand of crypto assets, but they may indirectly affect asset valuations through policy expectations, institutional capital, and market risk appetite. The most direct transmission channel is regulatory expectations. If, after the election, Congress can advance market structure legislation, the legal uncertainty faced by exchanges, DeFi projects, and institutional investors may decline, and the market may also price in this change in advance.
Conversely, if regulatory reform stalls for a long time, companies that rely on U.S. market access and compliant business expansion may face greater operating pressure, which would in turn affect investors' valuations of related assets. But the impact of policy on prices is uneven. BTC already has mature institutional investment channels such as spot ETFs, and macro liquidity, interest rate expectations, and capital flows are often more important than any single regulatory bill. Some DeFi tokens, exchange-related stocks, and financial services assets may be more sensitive to changes in regulatory rules. This means that even if the election results are favorable for certain sectors, it does not mean the entire crypto market will rise in tandem.
Looking at historical performance, in the years of the 2014, 2018, and 2022 midterm elections, BTC fell by about 56%, 73%, and 64% for the full year, respectively. Measured from around Election Day, however, performance over the following roughly 12 months improved, with some historical statistics showing gains of about 24.5%, 44.9%, and 92.3%, respectively. However, historical post-election gains do not prove that the midterm elections drove BTC bull markets. In 2014, BTC was still in an early stage of development; in 2018, it was affected by the bursting of the crypto market bubble; and in 2022, it experienced aggressive Federal Reserve rate hikes and the FTX collapse. Subsequent market changes were also affected by multiple factors such as monetary policy, industry cycles, and market liquidity. Especially in 2018, BTC still experienced a significant decline after the election ended, indicating that there is no stable short-term upward pattern around elections.
Figure 2. BTC performance before and after past U.S. midterm elections. Source: CoinW Research Institute.
Compared with the past, the crypto market in 2026 already has more mature spot ETFs and institutional participation channels, and policy changes can be transmitted to the broader capital market through listed companies, fund products, and crypto financial services. At the same time, investors will also adjust positions in advance before the election based on polls, policy statements, and market expectations. Therefore, when judging the impact of elections, one cannot look only at who ultimately controls Congress, but also at whether the actual results exceed market expectations and whether the macro environment supports gains in risk assets.
5. Under three possible election outcomes, how will crypto be repriced?
Different congressional configurations may change the way U.S. crypto regulatory reform advances and also affect market valuations of related companies and assets. The following analysis examines three possible scenarios, focusing on the policy changes and asset impacts each may bring, and does not represent a prediction of the election results. According to Polymarket prediction market data, as of 20:00 Beijing time on October 20, 2026, the market-implied probability of Democrats controlling both the Senate and the House was about 63%, the probability of Democrats controlling the House and Republicans controlling the Senate was about 28%, the probability of Republicans continuing to control both chambers was about 9%, and the probability of Republicans controlling the House and Democrats controlling the Senate was about 1%. These data reflect the market's trading expectations for different congressional configurations, not the final election results. The gap between actual results and market expectations may become an important factor affecting short-term crypto price volatility.
Figure 3. Balance of Power: 2026 Midterms. Source: https://polymarket.com/event/balance-of-power-2026-midterms
Republicans continue to control both chambers (Polymarket market-implied probability: about 9%)
If Republicans retain the Senate and House, the Trump administration's existing crypto policy direction is expected to maintain strong continuity. The CLARITY Act may regain momentum, and stablecoin regulatory implementation and institutional crypto financial businesses are also expected to continue developing along the current path. For trading platforms, stablecoin issuers, and crypto financial services companies, policy continuity helps reduce uncertainty in long-term operations. But continued Republican control of both chambers does not mean all crypto bills will pass smoothly. The bipartisan disagreements that previously blocked CLARITY still exist, and relevant provisions may still need to be renegotiated. At the market level, policy continuity may benefit companies that rely on regulatory clarity, but if investors had already fully anticipated this outcome, asset prices may not necessarily show sustained gains.
Democrats control at least one chamber (Polymarket market-implied probability: about 91% combined)
If Democrats retake the House or Senate, Congress will enter a state of divided government. It may become more difficult for the Trump administration to push through new crypto legislation, and relevant committees may also strengthen scrutiny of trading platforms, stablecoin businesses, and the crypto interests of government officials. Bills such as CLARITY will need to go through more bipartisan coordination, and the legislative timetable may be further delayed. Under this scenario, the market may lower valuations for some companies that rely on regulatory easing and rapid business expansion, especially businesses where product access, token classification, and compliance costs directly affect profitability. However, divided government does not mean crypto is bound to fall. BTC is still affected by ETF flows, dollar liquidity, and global risk appetite, and its trajectory may diverge from regulatory-sensitive assets.
Democrats control both chambers (Polymarket market-implied probability: about 63%)
If Democrats win control of both the Senate and the House, Congress's crypto legislative agenda may undergo more obvious adjustments. Issues such as consumer protection, anti-money laundering, financial stability, and conflicts of interest involving government officials' crypto holdings may receive more attention in bill negotiations and congressional oversight. Some exchanges and DeFi projects hoping to rapidly expand their product range may face a longer policy waiting period. But this scenario does not mean U.S. crypto regulation will immediately tighten across the board. The already effective GENIUS Act will not automatically become invalid, Trump can still exercise presidential powers, and regulators such as the SEC and CFTC will continue to work under existing laws. In addition, Democrats are not completely unified on crypto innovation and regulatory approaches, and specific policies will still depend on bill content and bipartisan negotiations. Therefore, the market needs to distinguish between a slowdown in legislation and actual changes to existing rules.
Figure 4. Crypto market impact matrix under three election outcomes. Source: CoinW Research Institute
Which assets are most sensitive to the midterm elections?
From an asset perspective, sectors that rely more on U.S. regulatory permission, product access, and business expansion are more likely to be directly affected by changes in congressional policy. However, it is necessary to distinguish between a beneficiary business model and a rise in the price of related tokens; the two cannot simply be equated. BTC's direct sensitivity to changes in congressional regulation is relatively moderate, and its main pricing factors remain spot ETF flows, dollar liquidity, and overall risk appetite. ETH and DeFi are relatively more policy-sensitive, as staking services, token classification, protocol liability, and institutional participation rules may all affect the ecosystem's room for development. However, even if the regulatory environment improves, it is still necessary to observe whether protocol usage and revenue can grow in tandem. Stablecoins and RWA also deserve attention. Stablecoins involve issuance regulation, reserve assets, bank access, and payment businesses, while RWA involves issuance, custody, and trading rules for tokenized securities. Regulatory clarity may attract more traditional financial institutions to enter, but growth in stablecoin supply does not mean that a certain public chain or a certain RWA token will necessarily receive corresponding benefits; the key still lies in fee revenue and token value capture mechanisms. Exchanges and related listed companies may be more directly affected commercially. Regulatory rules will affect the trading products they can offer, custody services, compliance costs, and revenue sources, so the valuations of related stocks may be more sensitive to policy changes. Prediction markets are also an area worth watching, especially the trading rules for political event contracts, prevention of market manipulation, and the CFTC's regulatory authority, which may be affected by congressional oversight and adjustments in regulatory policy. By contrast, Meme and other highly volatile tokens generally lack direct policy benefit channels, and their prices are more driven by market sentiment, leveraged trading, and liquidity. The above sensitivity is a qualitative judgment by CoinW Research Institute based on business models, not a fixed pattern derived from historical backtesting.
Figure 5. Sensitivity of different crypto assets to election policy. Source: CoinW Research InstituteResults met expectations—why might the market still trade in the opposite direction?
There is another risk in election trading that is easily overlooked. A political outcome meeting market expectations does not mean prices will necessarily move in the anticipated direction. For example, continued Republican control of both chambers might be interpreted as stronger policy continuity, but if investors had already bought heavily into related assets beforehand, profit-taking could instead emerge after the results are announced. Therefore, before the election, it is necessary to watch whether option implied volatility rises, whether futures open interest (OI) and funding rates indicate concentrated leverage, and whether ETF flows continue to be positive. After the results are announced, observe the market's expectation gap and changes in liquidity to judge whether the move has real funding support. Election results affect policy expectations, while how asset prices ultimately change also depends on the expectation gap, capital flows, and the sensitivity of different assets to regulation.
6. What is truly worth watching after the election?
After the 2026 U.S. midterm elections end, the market's focus will gradually shift from the election results to policy delivery. In the short term, it is necessary to observe the price performance of BTC and ETH, net inflows into spot ETFs, option implied volatility, futures OI, and funding rates to judge whether the move is driven by short-term leverage and sentiment. In the medium term, the key is whether the new Congress can make substantive progress in advancing regulatory reform. Focus on whether CLARITY re-enters the legislative agenda, personnel changes in Congress's finance-related committees, SEC and CFTC regulatory rules, and the subsequent implementing details of the GENIUS Act. These developments will determine whether policy expectations can gradually translate into actual improvements in the business environment for companies. In the long term, the key is whether institutional capital and real business can continue to grow. ETF holdings and fund flows, stablecoin supply, RWA market size, trading platform business data, and actual DeFi revenue can help judge whether the crypto industry is forming more stable funding demand and a commercial foundation. The U.S. midterm elections may affect the pace of advancing Crypto policy over the next two years, but will not directly determine whether the crypto market is in a bull or bear phase. Whether regulatory certainty can improve, whether institutional capital can continue to enter, and whether macro liquidity provides support are the core factors determining whether the market can sustain its move.