Texas Governor Greg Abbott ordered the arrest of Democrats who left the state on Monday. Abbott ordered their return to the statehouse to allow votes on several issues, including a new House map.
CFTC-regulated prediction market platform Kalshi forecasts a 22% chance (22¢) of a Texas House Democrat being arrested in August, down from 39% (39¢) when the market opened on Monday. Nearly $54,000 has been traded on the market so far.
Rep. James Talarico told MSNBC:
“This is like two teams coming out of the locker room at halftime, and the team that’s ahead saying they want to change the rules in the second half to make sure they win…If they’re gonna cheat, we’re not gonna play.”
Texas’ fight over redistricting has raised important questions about the impact the new map could have on the midterms.
Midterms unaffected by Texas drama
Despite the turmoil in Texas, Kalshi traders still favor the Democrats to regain control of the House after the 2026 midterms. Prediction market traders give Democrats a 70% chance (70¢) of winning the House, an unsurprising figure given Republicans’ slim House majority.
Democrats have a path to victory in House districts that Republicans won by slim margins in 2024 and that are feeling the worst effects of Trump’s tariffs. Consumers are already beginning to feel the impact of higher prices on tariffed goods.
Tariffs, fed rates, and the economy
The Fed chose to hold interest rates steady on July 30, waiting to see the impacts of tariffs on consumer spending and inflation before deciding whether to lower interest rates. Decreasing interest rates increases consumer spending power but also increases inflation. So, interest rates aren’t expected to fall until the inflation rate increases more slowly and consumer spending requires a boost.
Kalshi traders currently give the Fed a 76% chance (76¢) of cutting interest rates by 0.25% in September.
As Trump and his Republican allies continue bashing Fed Chair Jerome Powell for not lowering interest rates, Democrats have latched onto tariff policy as a way to try to regain momentum with voters going into the heat of midterms season. Whether voters feel the impact of Trump’s economic and spending policies enough to punish Republicans for them remains to be seen.
Economic issues like inflation consistently rank as the most important issues to voters. Even in 2022, after the Supreme Court eliminated federal protections for abortion access, inflation was the most important issue to voters overall. Any economic downturn Trump’s policies contribute to could improve Democratic electoral prospects in 2026.
