U.S Government Shutdown Fears Ease as Traders Cut Odds to 27%, Here’s Why

Concerns of a potential U.S. government shutdown at the end of January are starting to fade with prediction market traders beginning to bet against such a development. This comes amid positive signals from lawmakers and the belief that Washington will go lengths to avoid another standoff.

US Government Shutdown Odds Fall Sharply

According to Kalshi data, the likelihood of another shutdown going forward on January 31 has dropped to 27%. Its down from the levels of 40-48% observed just weeks earlier. Current market probabilities indicate there is about a 71% likelihood of an agreement being reached prior to the deadline.

There are many reasons for the reassessment, according to Walter Bloomberg. The main source of ease in fears of shutdowns is the One Big Beautiful Bill Act, which was enacted in 2025. This bill has pre-funded between 85% to 95% of the federal expenditure until September 2026.

This also provides full-year appropriations to many programs that would otherwise have to be renewed every year. That might affect how any potential US Government shutdown could impact all agencies and programs as few remain exposed to funding lapses.

Lawmakers are also acutely aware of the political cost associated with another shutdown, since they are just recovering from one.

Also, following the 2024 elections, Republicans control the White House, House of Representatives, and Senate. Therefore, that lessens the chances for a legislative gridlock. More commonly, shutdowns occur under divided government.

In November, there was a shutdown in the U.S., which was especially historic because it lasted for 43 days. This was due to lack of agreement on funding by both Republican and Democratic Parties.

Although this agreement extended funding for some parts until September, parts of the federal government remain at risk with the deadline for a deal set to pass on January 30.

As Congress adjourned for its Christmas recess, it had yet to agree on funding for a few major departments.

Political Tone Shows Signs of Softening

In spite of these outstanding problems, some indicators of tone shift are visible. Senate Minority Leader Chuck Schumer remarked at the beginning of the holiday season that he and Senate Majority Leader John Thune would “work through the process” and finish the appropriations bills.

President Donald Trump, on the other hand, has been taking a tough stand on the matter publicly. He warned against “extortion” tactics during the signing of the earlier funding deal.

Meanwhile, experts warn that a possible next government shutdown in the US may affect the economy. According to RSM Chief Economist Joe Brusuelas, another shutdown may slow economic growth by 1.5% for the fourth quarter.

With the full effects of such disruption not yet realized in the data, policymakers have all the more motivation to prevent such an occurrence from happening in the future.