Traders Forecast Brief But Likely Government Shutdown As Talks Stall

Senators failed to reach an agreement to avoid a government shutdown last Friday. Unless a new agreement is reached, the government will be shut down on Oct. 1.

CFTC-regulated prediction market platform Kalshi gives the government around a 65% chance of shutting down on Oct. 1, with ‘Yes’ contracts trading at 66¢ as of mid-day Wednesday. The non-cooperation between the parties does not seem to be encouraging traders that a shutdown will be avoided.

The odds spiked about 11% on Tuesday to a high of 71% after Trump cancelled a meeting with leading Democrats.

Pressure from voters to push back against Trump’s agenda is fueling the Democrats to leverage a shutdown. Democrats hope to secure healthcare spending as part of a funding deal. Meanwhile, Trump’s apparent determination to avoid compromising on his agenda is keeping Republicans in line with proposed spending bills.

Pre-shutdown meeting seems less and less likely

Kalshi also launched a market on whether Trump would meet with Chuck Schumer or Hakeem Jeffries by the shutdown deadline. The market opened on Tuesday, the morning that Trump cancelled his meeting with top congressional Democrats.

The odds opened at 41% and fell to 24% by the afternoon. ‘Yes’ is currently trading at 27% (31¢). Another meeting could take place that would prevent a shutdown–or delay it until a funding negotiation fails. Republicans need seven Democratic votes in the Senate to prevent a shutdown, and Democrats want to secure Obamacare subsidies set to expire this year.

The New York Times reported that Trump called Democratic demands “unserious” while Jeffries called Republicans “extremists.” The public tenor of the disagreement over government funding doesn’t seem encouraging for those hoping to avoid a shutdown.

However, the market has just around $2,000 in trading volume so far. Since it’s still new, the odds could change dramatically for traders who get in early, making it a potentially profitable short-term trading opportunity. The decision traders have to make is whether they think the odds will rise or fall as more traders participate in this market.

Traders expect a brief shutdown

Another related market projects how many days the government will be shut down this year. Kalshi traders forecast a 5.1-day shutdown at time of writing. Odds of a shutdown lasting more than three days is currently trading at 66% (64¢). However, the odds of a shutdown that lasts more than five days rose by 11 points from Monday to Tuesday and now sit at 46% (46¢). Trump’s refusal to negotiate with Democrats has made a protracted shutdown more likely.

There is still time to avoid a shutdown, but this market projects the likelihood of a shutdown of more than zero days at 75%.

Both sides have at least attempted to negotiate in the previous weeks. On Friday, two versions of a spending bill failed to pass in Congress. Previous shutdowns were averted at the last minute, like in December 2024. Politicians on both sides of the aisle were able to find an acceptable compromise for at least a few months.

As negotiations continue, prediction markets will be tracking the real-time odds of a meaningful breakthrough that could either avert or end a shutdown.