Washington may be heading toward another familiar shake-up, and this time inflation could be the spark.
Billionaire hedge fund manager Ray Dalio believes rising cost-of-living pressures are setting the stage for Democrats to reclaim power in Congress during the 2026 midterm elections.
If that happens, it could disrupt much of the regulatory momentum built under President Donald Trump and the Republican Party.
Why Inflation Could Decide the Midterms
According to Dalio, affordability is shaping up to be the defining political issue of the next election cycle.
When everyday expenses become harder to manage, voters tend to look for change—and history suggests that change often comes at the expense of the party in power.
Dalio argues that this dynamic puts Republicans at serious risk of losing control of the House.
That loss, he says, could usher in a turbulent period starting in 2027 and set the tone for a highly unpredictable 2028 presidential race.
Trump’s Narrow Window of Control
Dalio also points to the built-in limits of the US political system.
Presidents typically enjoy a relatively free hand during their first two years, before midterms potentially weaken their grip on Congress.
In Trump’s case, that window could close quickly.
If Republicans lose seats in 2026, Trump’s legislative agenda would face major obstacles—and by 2028, voters could fully reverse course.
As Dalio puts it, long-lasting one-party control has become increasingly rare in modern American politics.
Crypto’s Boom Under a Tech-Friendly White House
One of the biggest winners so far under the Trump administration has been the crypto industry.
A policy push centered on digital innovation, artificial intelligence, and emerging technologies has helped create a more favorable environment for crypto companies and investors.
But that momentum depends heavily on political alignment.
A shift in congressional power could stall or even undo the regulatory progress the industry has been counting on.
The Risk Facing Pro-Crypto Legislation
If Democrats take control of the House, key crypto-related bills could be sidelined.
One of the most important is the CLARITY market structure bill, which aims to define how digital assets are regulated in the US.
Without congressional support, the bill may never reach the president’s desk—at least not anytime soon.
That possibility has become a growing concern among lawmakers and industry insiders alike.
Why the CLARITY Act May Be Pushed to 2027
Investment bank TD Cowen suggests Democratic lawmakers may already be playing the long game.
With expectations of a power shift in 2026, some are reportedly delaying action on the CLARITY bill until after the elections.
The math makes their strategy plausible.
Republicans currently hold the House by just five seats, leaving little room for error.
Betting Markets Signal a Flip
Prediction markets are also signaling trouble for Republicans.
On Polymarket, traders are currently assigning Democrats roughly a 78% chance of winning back the House in November 2026.
While not a crystal ball, these markets often reflect collective sentiment—and that sentiment is clearly leaning toward a power change.
A Slim Majority and a Familiar Pattern
Industry leaders aren’t surprised by the odds.
Joe Doll, general counsel at NFT marketplace Magic Eden, previously pointed out that slim House majorities rarely hold.
He noted that divided government often leads to gridlock, with legislation getting stalled or frozen altogether.
In his view, crypto advocates realistically had just a two-year window to get meaningful regulations passed.
What’s Next?
All eyes are now on the clock. With midterms approaching and economic pressure mounting, the future of US crypto regulation—and much more—hangs in the balance.
Whether Republicans can defy historical trends or Democrats capitalize on voter frustration will shape not just 2026, but the political and regulatory landscape well into 2028.
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