#USGovernmentShutdownRisk

As of 31 January 2026, the risk of a U.S. government shutdown has become one of the most pressing political and economic stories in Washington and markets around the world. Despite intense negotiations in Congress and last-minute efforts to pass federal spending legislation, a partial shutdown of the federal government did in fact begin at 12:01 a.m. ET on January 31 after lawmakers failed to get a complete appropriations package signed into law before the funding deadline. This lapse reflects deep divisions over key funding priorities, especially regarding the Department of Homeland Security (DHS) and contentious immigration policy reforms.
The current shutdown is being described as partial and likely short-lived, but it nonetheless underscores a persistent pattern of fiscal brinkmanship in U.S. politics. In recent weeks, lawmakers had attempted to avert a shutdown by advancing a bipartisan spending deal in the U.S. Senate, which passed a revised package to fund most of the government through September 30, 2026. However, that bill did not include DHS funding and instead offered only a two-week extension, setting up a separate fight over immigration and enforcement policies. With the House of Representatives out of session until Monday, the Senate-approved package could not be finalized in time, triggering a funding lapse that began this weekend.
The shutdown reflects more than short-term political gridlock; it highlights deeper fractures in the budget process and the influence of broader policy disputes on routine governance. In particular, Senate Democrats have been firm in demanding new reforms on immigration enforcement including stricter oversight of ICE and Customs and Border Protection following high-profile incidents and have tied those policy priorities to their willingness to support DHS funding. Republicans, for their part, have resisted coupling appropriations with policy conditions, contributing further to the impasse.
From a prediction markets perspective, the odds of a shutdown had jumped significantly in the lead-up to the deadline, at times exceeding 70 – 80 % according to data from platforms like Polymarket and Kalshi in late January. These markets react swiftly to legislative developments and indicated rising probability amid stalled negotiations and growing political tension.
The impact of even a temporary shutdown is tangible. Federal agencies without funding are required to halt non-essential operations, and many federal employees may be furloughed or forced to work without pay until appropriations are restored. Agencies like the Department of Housing and Urban Development (HUD) and others that did not have full-year appropriations are expected to pause or dramatically slow operations; contingency plans will govern which functions continue during the shutdown.
Certain critical functions such as national security operations, disaster response, and core safety missions at agencies like the TSA, Coast Guard, and FAA may still operate under emergency guidelines, but even these face increased strain in prolonged shutdown conditions. There are also broader economic and market implications, from delayed economic data releases to potential increases in borrowing costs and business uncertainty if the shutdown stretches beyond a few days.
Looking ahead, the risk remains tied to ongoing negotiations between congressional leaders, the White House, and differing policy factions within both major parties. A swift passage of the revised Senate-approved package once lawmakers return could end the shutdown quickly, but significant policy differences especially on immigration and enforcement could extend the impasse if not resolved. In this environment, continued volatility in risk assets, cautious business planning, and uncertainty for federal workers are likely to persist until a final funding agreement is ratified and signed into law.