Written by: CoinW Research Institute
Bipartisan congressional maneuvering is shaping the trajectory of crypto‑related legislation, while diverging regulatory expectations could trigger a revaluation of asset prices.
Abstract
On November 3, 2026, the U.S. midterm elections will serve as a key determinant of the trajectory of crypto regulation over the next two years. While the GENIUS Act has already been enacted, the CLARITY Act remains stalled due to congressional gridlock, and even substantial political spending by the crypto industry has failed to overcome legislative resistance. The central impact of this election will not be to tip the market between bullish and bearish conditions for crypto, but rather to shape the pace of regulatory reform and market expectations. A Republican hold on both chambers would favor policy continuity, whereas divided control or Democratic dominance in both houses could heighten legislative hurdles—though the implications would vary significantly across asset classes. Bitcoin is more reliant on macro liquidity and ETF capital, while DeFi, stablecoins, and trading platforms are far more sensitive to shifts in regulatory frameworks. In the short term, the midterm elections may prompt markets to front‑load pricing based on expectations, followed by countertrend volatility once results are announced; in the longer term, outcomes will hinge on how post‑election crypto‑regulatory policies are implemented, as well as on institutional inflows and genuine growth in the sector's underlying business.
1. Why have midterm elections become a key variable for crypto?
On November 3, 2026, the United States will hold its midterm elections, with all 435 seats in the House of Representatives and 35 seats in the Senate up for re-election. Unlike presidential elections, the midterms will not alter Trump's presidency, but they could shift control of Congress between the Republican and Democratic parties, thereby influencing the advancement of U.S. crypto regulatory policies over the next two years. Why is congressional control so crucial for crypto? Major U.S. crypto‑related bills typically require passage by both the House and the Senate before being sent to the president for signature. The House is responsible for reviewing, amending, and voting on legislation, while the Senate must conduct further deliberations and votes. Take the CLARITY Act as an example: it was approved by the House in July 2025, but in September 2026, it failed to clear the procedural threshold in the Senate. Even if the president supports crypto, unless Congress can reach sufficient consensus, related regulatory reforms may still stall.
The two chambers also differ in their respective areas of influence. A shift in control of the House of Representatives could affect the legislative agenda for crypto‑related bills, budgetary priorities, and the intensity of oversight investigations into regulatory agencies; by contrast, a change in Senate control may shape the progress of legislation and the appointment of senior officials at regulatory bodies such as the SEC and the CFTC.
Notably, in the Senate, most ordinary legislation typically requires 60 votes to end debate, rather than a simple majority. Consequently, even if a single party holds a majority of seats, it may still be unable to advance crypto‑related legislation on its own. At present, Republicans control both the House and the Senate, with the Senate holding 53 seats. Should the midterm elections shift control of one or both chambers, the legislative agenda and the dynamics of policy negotiations in Congress could likewise undergo significant adjustments.
What this election will truly determine is the pace and stability of U.S. crypto regulation over the next two years, as well as the market's assessment of whether such policies will be implemented.
Figure 1. How U.S. Midterm Elections Influence Crypto Regulation. Source: CoinW Research Institute
2. Where has U.S. crypto regulation reached ahead of the election?
To understand the impact of the midterm elections on crypto, it's first necessary to distinguish between the laws that have already been enacted in U.S. crypto regulation and the reforms still under negotiation in Congress. The former primarily face challenges in implementation, while the latter could be directly affected by shifts in congressional control. The GENIUS Act and the CLARITY Act aptly illustrate this distinction.
In July 2025, Trump signed the GENIUS Act, establishing a federal regulatory framework for U.S. payment‑type stablecoins. The legislation requires compliant issuers to hold at least a 1:1 reserve of eligible assets, including U.S. dollar cash and short‑term Treasury securities, and sets forth clear requirements for redemption, information disclosure, and oversight. This provides a clearer legal foundation for stablecoin issuers, banks, and payment institutions to conduct related business. Since the GENIUS Act has already become law, it will not automatically expire due to the midterm elections; however, the new Congress may influence the subsequent policy direction through oversight, hearings, or legislative amendments.
However, the passage of the legislation does not mean that all disputes have been resolved. Whether stablecoins can offer yields to users through third-party platforms, whether they will siphon deposits from traditional banks, and how banks should engage in related activities remain contentious issues. The specific implementing rules will be formulated primarily by regulatory agencies authorized by law, while shifts in congressional control could influence the priorities of subsequent oversight and the scope for policy adjustments.
Compared with stablecoins, the broader U.S. crypto‑asset market still lacks a unified regulatory framework. The CLARITY Act seeks to clarify which tokens qualify as securities and which are classified as digital commodities, delineate the respective jurisdictions of the SEC and the CFTC, and provide clearer compliance guidelines for trading platforms, DeFi protocols, and developers.
Unlike the GENIUS Act, which has already become law, CLARITY has not yet been enacted, making it more susceptible to the outcomes of the midterm elections. On September 15, 2026, the Senate held a procedural vote on a motion to end debate and proceed to a final vote on the matter, resulting in 49 votes in favor and 50 against—short of the usual 60-vote threshold. Although this vote concerned only the motion to close debate, rather than a final vote on the CLARITY bill itself, it nonetheless highlighted the political obstacles facing regulatory reform. Some Democratic lawmakers have called for stronger consumer protections, anti–money‑laundering measures, and restrictions on conflicts of interest involving government officials and their family members in crypto‑related activities, while some Republicans also hold differing views. Meanwhile, the banking sector worries that stablecoin‑yield products could siphon deposits away from traditional accounts, undermining banks' funding base.
The challenges facing CLARITY extend beyond the jurisdictional boundaries between the SEC and the CFTC, encompassing the coordination of interests among crypto firms, traditional banks, and diverse political stakeholders. Following the midterm elections, whether Congress can muster sufficient bipartisan support will directly shape the prospects for advancing this reform.
Even if congressional legislation stalls, the Trump administration can still, through regulatory agencies such as the SEC and CFTC, adjust rule interpretations, enforcement priorities, and supervisory approaches within the scope of existing legal authority, thereby providing a relatively clear operating environment for crypto businesses. However, administrative policies may face judicial challenges and could also shift with changes in future administrations or leadership at regulatory agencies, generally offering less long-term stability than a well-defined legal framework. Therefore, the key implications of this midterm election for U.S. crypto regulation lie in whether already enacted laws can be implemented smoothly and whether pending market‑structure reforms can continue to move forward. These two developments will shape the regulatory landscape and growth expectations for the U.S. crypto industry over the next two years.
3. Crypto Political Funding and the Regulatory Battle in the U.S. Midterm Elections
The stalled passage of the CLARITY Act has underscored for crypto firms that presidential or regulatory support alone is insufficient; whether enough members of Congress are willing to advance relevant legislation is equally critical. Consequently, the crypto industry has increasingly invested in U.S. elections in recent years, seeking a policy environment more conducive to its growth. According to an analysis by Public Citizen of data from the Federal Election Commission and other sources, as of the second quarter of 2026, crypto companies had contributed approximately $206 million to political action committees in this election cycle—exceeding the roughly $170 million in corporate political donations recorded during the 2024 cycle.
Coinbase, Ripple, a16z, and other companies and investment firms are key players, while Fairshake is one of the industry's major political fundraising platforms. Fairshake is a Super PAC, which can raise substantial funds and support or oppose candidates through independent advertising and other means, but it cannot make unlimited direct contributions to candidates nor coordinate these independent expenditures with the candidates' campaign teams. For the average reader, it can be understood as the crypto industry using legal campaign-funding channels to express which policy positions it wishes to support.
Why are crypto firms willing to invest so heavily? Because the rules crafted by Congress could directly shape the types of business activities they can pursue in the future. Exchanges seek clear guidelines on token listing and trading, stablecoin issuers focus on the regulatory framework for payments and yield‑generating services, and DeFi projects aim to clarify developers' legal liabilities. The greater the regulatory uncertainty, the more obstacles firms face in scaling, raising capital, and innovating. Notably, the crypto industry has not pinned all its political support on the Republican Party; instead, it has sought to rally lawmakers from both parties who back pro‑crypto policies. This reflects the U.S. legislative process: regardless of which party controls Congress, major reforms typically require bipartisan cooperation. That said, political contributions can amplify the industry's ability to voice its concerns, but they do not guarantee a candidate's election, nor do they determine whether a bill will pass. The upcoming midterm elections will test whether these political investments translate into more stable congressional support.
4. From political shifts to BTC prices: How do elections impact the crypto market?
Earlier, we discussed regulatory legislation and industry political spending, but investors are more concerned with whether the midterm elections will affect the prices of crypto assets such as BTC and ETH. While the election outcome itself will not directly alter the supply and demand for these assets, it could indirectly influence their valuations through policy expectations, institutional capital flows, and shifts in market risk appetite. The most direct transmission channel is regulatory expectations: if, following the election, Congress makes progress on market‑structure reforms, legal uncertainty for exchanges, DeFi projects, and institutional investors could diminish, and the market may price in this change ahead of time.
Conversely, if regulatory reforms remain stalled for an extended period, companies that rely on U.S. market access and compliance‑related business expansion may face heightened operational pressures, which could in turn affect investor valuations of related assets. However, the policy‑driven impact on prices is uneven. Bitcoin already benefits from established institutional investment channels, such as spot ETFs, meaning that macro liquidity, interest‑rate expectations, and capital flows often carry more weight than any single regulatory measure. By contrast, certain DeFi tokens, exchange‑related equities, and financial‑services‑sector assets may be far more sensitive to shifts in regulatory frameworks. This implies that even if election outcomes favor particular industries, they do not necessarily translate into a synchronized rally across the broader crypto market.
Historically, in the years of the midterm elections—2014, 2018, and 2022—Bitcoin posted annual declines of roughly 56%, 73%, and 64%, respectively. However, when measured from the period around the election date, its performance over the subsequent 12 months tends to improve, with historical data showing gains of approximately 24.5%, 44.9%, and 92.3% in those years. That said, past post‑election rallies do not necessarily prove that midterm elections drive a Bitcoin bull market. In 2014, Bitcoin was still in its early stages; in 2018, it was weighed down by the bursting of the crypto‑market bubble; and in 2022, it faced aggressive Fed rate hikes and the collapse of FTX. Subsequent price movements were also shaped by a confluence of factors, including monetary policy, industry cycles, and market liquidity. Notably, in 2018, Bitcoin continued to decline even after the election, underscoring that there is no consistent short‑term upward trend tied to midterm elections.
Figure 2. BTC performance before and after each U.S. midterm election. Source: CoinW Research Institute.
Compared with the past, the crypto market in 2026 has more mature spot ETFs and institutional‑level access channels, and policy shifts can ripple through listed companies, fund products, and crypto‑related financial services to broader capital markets. At the same time, investors tend to adjust their positions ahead of elections, factoring in opinion polls, policy statements, and market expectations. Consequently, when assessing the election's impact, it is essential not only to consider which party ultimately controls Congress but also to evaluate whether the actual outcomes exceed market expectations and whether the broader macro environment supports a rally in risk assets.
5. Under three possible election outcomes, how will Crypto be repriced?
Different congressional configurations could alter the trajectory of U.S. crypto‑regulatory reform and influence market valuations of related companies and assets. Below, we analyze three possible scenarios, focusing on the policy shifts and asset implications each entails—though these do not constitute a prediction of the election outcome. According to Polymarket's predictive‑market data as of October 20, 2026, Beijing time, the market assigns roughly a 63% probability to Democrats controlling both the House and Senate, about a 28% chance of Democrats holding the House and Republicans the Senate, approximately a 9% likelihood of Republicans retaining control of both chambers, and roughly a 1% probability of Republicans dominating the House while Democrats hold the Senate. These figures reflect market expectations for various congressional outcomes, rather than definitive election results. Discrepancies between actual outcomes and market forecasts could serve as significant drivers of short‑term price volatility in the crypto space.
Figure 3. Balance of Power: 2026 Midterms. Source:
The Republican Party continues to control both chambers (Polymarket market-implied probability: approximately 9%).
If the Republican Party retains control of both the Senate and the House, the Trump administration's existing crypto policy framework is likely to maintain strong continuity. The CLARITY Act may once again gain momentum, and the regulation of stablecoins and the development of institutional crypto‑finance services are also expected to proceed along their current trajectory. For trading platforms, stablecoin issuers, and crypto‑financial service providers, policy continuity helps reduce long-term operational uncertainty. However, Republican control of both chambers does not guarantee the smooth passage of every crypto‑related bill. The bipartisan differences that previously blocked the CLARITY Act remain intact, and its provisions may still require renegotiation. At the market level, policy continuity could benefit companies that rely on regulatory clarity; yet if investors have already fully priced in this outcome, asset prices may not experience sustained gains.
The Democrats control at least one chamber (Polymarket market-implied probability: approximately 91% combined).
If the Democratic Party regains control of either the House of Representatives or the Senate, Congress will enter a divided-government state. The Trump administration may face greater challenges in advancing new crypto legislation, and relevant committees could tighten scrutiny of trading platforms, stablecoin operations, and government officials' crypto-related interests. Bills such as CLARITY would need to navigate more bipartisan coordination, potentially further delaying their legislative timelines. Under this scenario, the market might lower valuations for companies that rely heavily on regulatory easing and rapid business expansion—particularly those whose profitability is directly affected by product approvals, token classifications, and compliance costs. However, a divided Congress does not necessarily mean a downturn for crypto. BTC will continue to be influenced by ETF inflows, U.S. dollar liquidity, and global risk appetite, and its price action may diverge from that of other regulation-sensitive assets.
The Democrats control both chambers (implied probability on the Polymarket: approximately 63%)
If the Democratic Party gains control of both the House and the Senate, Congress's crypto‑legislation agenda could undergo more significant adjustments. Issues such as consumer protection, anti‑money laundering, financial stability, and conflicts of interest involving government officials' crypto holdings may receive greater attention during bill negotiations and congressional oversight. Some exchanges and DeFi projects that seek to rapidly expand their product offerings might face longer policy wait times. However, this scenario does not necessarily mean that U.S. crypto regulation will tighten across the board overnight. The already‑enacted GENIUS Act will not automatically expire, Trump can still exercise his presidential powers, and regulatory agencies like the SEC and CFTC will continue to operate under existing laws. Moreover, there is no complete consensus within the Democratic Party on crypto innovation and regulatory approaches; specific policies will ultimately depend on the content of proposed legislation and bipartisan negotiations. Therefore, the market must distinguish between a slowdown in legislative activity and an actual change to existing rules.
Figure 4. Crypto Market Impact Matrix Under Three Election Scenarios. Source: CoinW Research Institute
Which assets are most sensitive to the midterm elections?
From an asset‑level perspective, sectors that rely more heavily on U.S. regulatory approvals, product market access, and business expansion are likely to be directly affected by changes in congressional policy. However, it's important to distinguish between industry‑wide business model benefits and corresponding token price appreciation; the two are not necessarily equivalent. BTC exhibits relatively moderate direct sensitivity to shifts in congressional regulation, with its primary pricing drivers remaining spot ETF inflows, U.S. dollar liquidity, and overall risk appetite. By contrast, ETH and DeFi tend to be more policy‑sensitive, as factors such as staking services, token classification, protocol liability, and institutional‑entry rules can all shape the ecosystem's growth trajectory. Even if the regulatory environment improves, it will still be crucial to monitor whether protocol usage and revenue grow in tandem. Stablecoins and RWA assets also warrant close attention. Stablecoins involve issuance oversight, reserve‑asset management, banking‑access requirements, and payment‑service regulations, while RWA pertains to the issuance, custody, and trading frameworks for tokenized securities. Clearer regulatory guidance could attract more traditional financial institutions, but an increase in stablecoin supply does not automatically translate into commensurate gains for a particular blockchain or RWA‑related token—key determinants remain fee‑based revenue streams and mechanisms for capturing token value. Exchanges and related publicly listed companies may face more direct commercial implications. Regulatory rules can influence the range of tradable products they offer, their custody services, compliance costs, and revenue sources, making the valuations of associated equities potentially more sensitive to policy shifts. Prediction markets are another area worth watching, particularly as trading rules for political‑event contracts, measures to prevent market manipulation, and the CFTC's regulatory authority could all be subject to congressional scrutiny and adjustments in regulatory policy. By contrast, meme coins and other highly volatile tokens typically lack clear channels for deriving policy‑driven benefits; their prices are driven primarily by market sentiment, leveraged trading, and liquidity dynamics. The sensitivities outlined above reflect CoinW Research Institute's qualitative assessments based on business models, rather than fixed patterns derived from historical backtesting.
Figure 5. Sensitivity of Different Crypto Assets to Electoral Policies. Source: CoinW Research Institute
The outcome was as expected—so why might the market still trade in the opposite direction?
Election‑related trading carries another risk that is often overlooked. Even when political outcomes align with market expectations, prices do not necessarily move in the anticipated direction. For example, if the Republican Party retains control of both chambers, this might be interpreted as signaling policy continuity; however, if investors have already built up substantial positions in the relevant assets, profit‑taking could set in once the results are announced. Consequently, ahead of an election, it is important to monitor whether options' implied volatility has risen, whether futures open interest (OI) and funding rates indicate concentrated leverage, and whether ETF flows remain robust. After the results are released, one should assess the gap between market expectations and actual outcomes, as well as changes in liquidity, to determine whether price moves are underpinned by genuine capital inflows. While election outcomes shape policy expectations, the ultimate direction of asset prices will also depend on the magnitude of expectation gaps, capital flows, and the degree to which different asset classes are sensitive to regulatory developments.
6. What should we really pay attention to after the election?
Following the 2026 U.S. midterm elections, market attention will gradually shift from election outcomes to policy implementation. In the short term, it will be important to monitor BTC and ETH price action, net inflows into spot ETFs, options implied volatility, futures open interest, and funding rates to assess whether price movements are driven by short-term leverage and sentiment. Over the medium term, the key question is whether the new Congress can deliver meaningful progress on regulatory reform. Particular focus should be placed on whether CLARITY returns to the legislative agenda, personnel changes in congressional financial committees, the regulatory frameworks of the SEC and CFTC, and the detailed implementation rules for the GENIUS Act. These developments will determine whether policy expectations translate into tangible improvements in the operating environment for businesses. Looking ahead to the long term, the critical factors will be whether institutional capital and real‑world demand continue to grow. ETF holdings and capital flows, stablecoin supply, the size of the RWA market, trading platform metrics, and DeFi's actual revenue streams can help gauge whether the crypto industry is establishing a more stable foundation of funding needs and commercial activity. While the U.S. midterms may influence the pace of crypto‑policy advancement over the next two years, they will not directly dictate the market's bull–bear cycle. The core determinants of sustained price trends remain: the clarity of regulatory frameworks, the continued influx of institutional capital, and the degree to which macro liquidity provides support.