Since the start of February, the odds of a government shutdown have roughly doubled from 32% to 63% on prediction markets. The shutdown threats come from Democrats determined to protect parts of government funding from DOGE’s cuts.
Prediction markets signal alarm
On Monday, prediction market exchange Kalshi listed the probability of a government shutdown at 63%. The $4.3 million market has been open since Nov. 5, weeks before credible government shutdown threats from congressional Republicans in mid-December.
Kalshi’s government shutdown market will resolve to ‘Yes’ if any government shutdown occurs before 2026. The March 14 deadline is only the latest standoff over government funding.
Holding the federal government hostage
The U.S. government is funded through bills that must make it through Congress. There was almost a government shutdown in December 2024 after Elon Musk opposed the fragile bipartisan funding bill. It took Speaker Mike Johnson three funding bills to fund the government before the December shutdown deadline.
Johnson’s successful funding bill was a stop-gap measure that funded the government through March 14. It also revealed the pressures that any bipartisan funding measure could face. Musk was able to torpedo Johnson’s spending bill before heading DOGE and cutting funds to USAID and other government programs.
Now, it’s Democrats who are incentivized to leverage a government shutdown.. Without the presidency or a majority in either chamber of Congress, Democrats have few ways to block legislation they disagree with. They have had to rely on the judiciary to block or slow funding cuts that Democrats are unable to fight until after the midterms.
"What leverage do we have?" says Democratic House Minority Leader Hakeem Jeffries. "They control the House, the Senate and the presidency; it's their government." pic.twitter.com/GAI1LYQJM7
— Ken Klippenstein (@kenklippenstein) February 9, 2025
Between Republican commitments to cutting government spending and few options for Democrats to fight back, prediction markets forecast a similar chance of a shutdown as the days before the December shutdown scare. It shows how serious the 2025 shutdown threat is with almost five weeks before the deadline.
