Midterm Election Outlook and Implications for Trump and Crypto

Author: jiayi 加一

What do the midterm election results mean for Trump and Crypto?

There's currently a lot of anxiety on CT that Trump will lose in the midterms and crypto policy will be over.

I also felt anxious. Then I looked up the historical data from U.S. midterm elections, and contrary to intuition,

——

Since 1946, in 20 midterm elections, the president’s party lost seats in 18 of them—90%.

On average, losing 28 House seats and 4 Senate seats. Losing is the norm. It’s more like a gravitational force in American politics—voters are always correcting their choices from two years ago.

So the crypto community is anxious about Trump losing? That’s not anxiety—that’s common sense.

Historically, there have been only three exceptions, each driven by a large enough external event to override voters’ “correction instinct”: Roosevelt in 1934 benefited from the bottoming out of the Great Depression, Clinton in 1998 from the backlash against Republican impeachment efforts, and Bush Jr. in 2002 from the post-9/11 patriotism surge. All three were sustained by extreme external events. Normal governance? Voters simply don’t reward it. Because voters generally fear excessive presidential power, this is also why most midterm presidents fail to win.

No depression-level bottom, no opponent self-destructing, no national security-level moment of unity—midterm seat losses are almost certain.

2026: Trump's fundamentals

First, let’s look at the current data:

Trump's approval rating is 41%, with a disapproval rating of 57%, resulting in a net approval of -15.2%. Economic approval is even worse—at 31%, a career low.

The overall environment is even less favorable. The war in Iran is still ongoing. Tariffs are causing American households to spend an additional $233 per month on average. Oil prices could spike above $120 at any moment. This represents the largest increase in tax burden as a share of GDP since 1993.

The Republican Party has a majority of only five seats in the House. Five seats. The Kalshi prediction market gives the Democratic Party an 84% chance of taking control of the House.

But the Senate is a different story. The 2026 map is relatively favorable for Republicans—Democrats have more seats to defend. So the mainstream prediction is: Democrats take the House, Republicans hold the Senate. A classic divided government scenario.

Historically, Wall Street’s reaction to this outcome has been relatively positive. A divided government means no one can push extreme policies = higher policy predictability. But for Trump’s governing pace, this is a wall—legislation stalls, leaving only executive orders.

If Trump loses the House, does he have no cards left to play?

A divided government is indeed a wall, but not a dead end.

First is the executive order—the tool Trump is most familiar with and most comfortable using. Changing the SEC chair, shifting the CFTC’s stance, Treasury guidance on stablecoins, and the OCC’s regulatory attitude toward banks custodizing crypto—all of these do not require congressional approval. During his first term, Trump signed over 220 executive orders, and his pace in a second term would be even faster. Most crypto-related regulatory rollbacks can be accomplished through executive action.

Second is the power of institutional appointments: the President nominates, and the Senate confirms. If the Republicans retain control of the Senate, Trump’s appointments to key positions at the SEC, CFTC, Fed, and Treasury will proceed smoothly. Whether regulation becomes "loose" or "tight" often depends less on legislation and more on who sits in that chair.

Third is the reconciliation process. If the Republican Party controls the Senate plus either chamber, budget-related bills can pass with a simple majority, bypassing the 60-vote threshold. Crypto-related tax provisions (such as how staking income is taxed or digital asset reporting rules) have the potential to proceed through this route.

Fourth is the veto power. Even if the Democratic-controlled House passes an anti-crypto bill, the Senate can stall it, and Trump can veto it again—making it unlikely to become law. The defense cards are playable.

What truly cannot be moved is structural legislation requiring a majority in both chambers—the CLARITY Act, a market structure bill, and the full version of a stablecoin bill. If these bills miss the summer 2026 window, executive orders may address short-term issues, but they cannot deliver the "legal certainty" the industry truly seeks.

So although Trump lost the House in the midterm elections, his crypto policies won’t stop—but the pace will shift from the “legislative era” back to the “executive order era.” Short-term bullish momentum will continue, but the long-term framework may have to wait until after 2028. What does this mean for crypto?

Two key bills are currently under review: the CLARITY Act (Market Structure Bill) and the Stablecoin Bill. In January, the Senate released a 278-page draft, which is currently stalled over provisions regarding stablecoin yields and the definition of DeFi regulation.

The legislative window is closing rapidly.

The Democratic strategy is clear—to delay. Delay until after the midterms. If they gain control of the House, rewriting the terms or outright shelving them are both options. The most optimistic scenario is passage before summer 2026; missing this window could push it to 2027 or beyond.

The crypto industry knows this best. Fairshake, the industry’s largest super PAC, currently holds $193 million in cash, backed by Coinbase, a16z, Ripple, and others. The entire industry has poured at least $288 million into the midterm elections.

A midterm election, with the industry betting more than during the last presidential election cycle.

But money can't fix fundamentals. The deciding factors in the midterm elections are the economy and sentiment, with industry lobbying coming after. When voters go to the polls, they're thinking about gas prices and grocery bills, not stablecoin yield terms. Stand With Crypto says there are nearly 300 pro-crypto lawmakers in Congress right now—that’s a nice number, but it’s a 2024 election windfall that could shrink by 2026.

Expectations and Disappointments Regarding Trump

Let’s address another point many people are unwilling to face.

We have placed too much expectation on Trump in the crypto space.

So at this stage, many people—even most—feel let down or disappointed. The bill is progressing slowly, prices haven’t outperformed expectations, and policy implementation hasn’t been as direct as imagined.

But don’t forget one thing: Trump is the most crypto-friendly president so far. He opened a new world order for crypto.

From the SEC’s shift in attitude, to the opening of ETFs, to stablecoin legislation entering Congress’s agenda, to pro-crypto lawmakers being elected to Congress—these were unthinkable in 2022. The very fact that we’re now debating whether the legislative window is closing is a massive advancement. In 2022, there wasn’t even a window to discuss.

Disappointment stems from expectations being set too high. But the landscape has truly changed.

Finally

It is highly likely that the Republican Party will lose the House in the midterm elections. Historical patterns show that 90% of ruling parties lose in midterms, unless an extreme external event occurs—which is not the case right now.

The real window for crypto legislation closes before summer 2026. Miss this window, and key bills may not be addressed until after 2027. The industry should focus on legislative progress, not predictions about midterm election outcomes.

$288 million in industry political spending is essentially buying time—aiming to push key legislation through before the Democrats potentially take control of the House.

The crypto industry is currently in a position similar to Bush after 2002—still holding decent cards, but the window of time is closing.

We look forward to improvements; the vision will not regress. These are two separate matters.