Fears of an imminent U.S. government shutdown have subsided dramatically following renewed budget negotiations between President Donald Trump and Senate Majority Leader Chuck Schumer. Market sentiment improved as lawmakers work to finalize a funding deal before the Friday midnight deadline, with a significant drop in prediction market odds reflecting growing optimism.
Prediction markets on Polymarket show a sharp decline in shutdown probability, falling nearly 33 percentage points from around 80% earlier in the week. This dramatic shift indicates traders believe Congress can reach an agreement to fund the government through the remainder of the fiscal year.
The breakthrough centers on a restructured funding plan being considered by Senate leaders. The new approach would separate Department of Homeland Security (DHS) funding from six other spending bills covering health programs and federal agencies. This separation aims to bypass political gridlock over immigration policy, which had been the primary obstacle. Earlier, Senate Democrats had refused to support the funding bill without changes to immigration enforcement policies, specifically pushing for limits and tighter oversight of Immigration and Customs Enforcement (ICE). Recent discussions suggest Democrats may now accept temporary solutions, reducing the risk of a prolonged standoff.
A government shutdown would have significant consequences for the cryptocurrency sector. During previous shutdowns, the Securities and Exchange Commission (SEC) halted reviews of crypto-related applications, delaying approvals for digital asset funds like ETFs. A similar pause could disrupt ongoing regulatory efforts, including work on new rules for tokenized assets and digital markets, and could delay key legislation such as the CLARITY Act. The Commodity Futures Trading Commission's (CFTC) efforts to improve crypto oversight would also be affected if agencies are forced to close.
While the immediate risk has fallen sharply, the outcome remains contingent on lawmakers finalizing and passing the revised funding plan before the deadline. For now, markets and policymakers maintain cautious optimism that a last-minute agreement will avert another disruptive government shutdown.
