ICE Shutdown or Shut Down ICE

Forecasting the government shutdown with Above the Fold

Jan 29, 2026

Warning: This is a newsletter on a fast-moving topic. By the time you read this, the odds of a shutdown might have changed dramatically!

How Did We Get Here?

Time travel with me one week into the past. We’re just two months removed from a painful government shutdown. While several appropriations bills have already gone through, funding about half the government through the end of the fiscal year in September, six of the twelve bills are still tied up in a package in the Senate. These would fund the Departments of Defense, Labor, Health & Human Services, Education, Transportation, and Housing & Urban Development, as well as the State Department, the Treasury, and the IRS. There is little appetite from either party for another prolonged shutdown, and negotiations have so far gone surprisingly smoothly. Odds of a shutdown at the end of the month are only at about 10%, the lowest shutdown odds we’ve seen under this administration. While everything else in the world seems chaotic, from domestic troubles in Minnesota to foreign adventurism in Greenland and Iran, you can count on our imperturbable Senators to finish the job and lay the groundwork for a solid year…

Oh, wait, my editor is telling me I forgot one of the appropriation bills remaining in the funding package. Ummm, the Department of Homeland Security. That one should be uncontroversial, right?

Well, it looks like something happened on the government shutdown market right around January 24th. That would be the tragic shooting of Alex Pretti by DHS agents in Minneapolis. As events and narratives unfolded in the aftermath, pressure on democratic Senators rapidly grew, leading several to announce that they could not support the DHS funding bill as it stood.

Now, it appears that the only way to avert a shutdown will be for the DHS funding bill to be separated (in the House) within the next 24 hours so that the rest of the package can be sent through, which Senate dems appear more than willing to do.

Surprisingly, many Republicans, and even the White House, appear open to this! However, the timeline is fast, which is why the shutdown market is fluctuating around 60%.

The odds dropped precipitously into the 40s last night after it appeared that a compromise was in the works, but that might have been premature, given the intractability of rapidly shifting bicameral negotiations. After rising back up to 75%, the odds have fallen again this afternoon to between 55 and 65%. I guess we can confidently say at this moment that a shutdown “may or may not happen.”

The odds on a prolonged shutdown are somewhat lower, below 50%, implying that if there is a shutdown, there’s a decent chance it’s shorter than the one we saw last October and November. If it’s only a matter of separating out the DHS bill from the rest of the package, that might be a process with limited negotiations and a quick resolution. It also appears possible for the DHS appropriations section to be modified to a few weeks of stopgap funding, to give time for negotiations to take place.

However, there’s always the chance that the White House sees no way of getting DHS funding through the Senate outside of the package, and prefers to force the matter, telling Congressional Republicans to not allow this separation.

This would likely lead to longer negotiations, possibly over coupling the package with some set of regulations on DHS behavior or utilization, which could take an indeterminate amount of time. Under this scenario, a longer shutdown would be plausible. On this market, albeit on low volume, traders seem to price in about 8% odds that there will be a shutdown lasting over a month. Conditional on there being a shutdown at all, that rises to ~12%.

The Fine Print

One thing to note with all these markets, especially when comparing between Manifold’s odds and those of real money platforms like Kalshi or Polymarket, is the way that they’re operationalized. We’ve all learned our lesson from the previous “technical shutdowns” that lasted a few hours, and most market criteria now are tied to the OPM’s notifications. Brad’s market at the top of this article has rather elegantly concise criteria (note the “if and only if”):

Resolves YES iff the US Office of Personnel Management announces a federal government shutdown (including a partial shutdown) due to a lapse in appropriations on the operating status page by 11:59pm ET on January 31st, 2026.

However, there’s still room for gray area. OPM could simply neglect to issue a notification if deems the partial shutdown is really partial. Most traders think that a shutdown of just DHS would likely not lead to a notification by OPM, for example.

The resolution criteria on other prediction market platforms seem to have a slight contradiction, additionally. Some specify separately that a partial shutdown would in fact qualify, but also that the market requires an OPM announcement. It’s possible that there is a partial shutdown without the OPM announcement. Other prediction markets tie resolution to “a funding lapse,” which creates more gray area. Would a funding lapse just for DHS qualify?

I’ve made a market to see if traders think Polymarket, Kalshi, and Manifold will all resolve their shutdown markets in the same direction. It’s hovering in the 80s with a handful of traders.

ICE Repercussions

While Congress frets about ICE actions and deliberates funding for DHS, the Trump administration has already pivoted away from a full-throated endorsement for the Minnesota crackdown.

Traders now think it’s quite likely that the ICE members involved in the Pretti shooting will face consequences (including unpaid leave or filed charges)

Traders are, however, giving low odds to charges filed in the near term. As some have astutely pointed out, if state charges are filed in Minnesota, federal prosecutors have the chance to step in and supersede these charges, allowing for a preemptive federal pardon. Minnesota prosecutors may elect to hold off filing charges for three years(!) until the next federal administration, as murder charges do not carry a statute of limitations.

Traders also think a third civilian death at the hands of DHS, anywhere in the country, is unlikely, as the Trump administration signals a willingness to move past the incident and rein in DHS.

Greg Bovino, who led the administration’s DHS actions in Minnesota, has been demoted and returned to a more provincial role in California, with traders giving pretty good odds to something like a forced retirement within the year. Tom Homan, Trump’s border czar, has been brought in to manage the situation.

One lever that many traders are looking at is Trump’s ability to invoke the Insurrection Act. The odds of that happening over his whole term remain above 60%, even as the odds of it happening within the month have fallen to 7%. Such an action could occur close to the midterms or perhaps the federal elections in 2028.

Roundup

Amidst this turmoil, odds of Democrat control of Congress after the midterms remains stable at 30%, which mostly remains dependent on a few key primaries in Michigan, Texas, and Maine:

Odds that Congresswoman Ilhan Omar was sprayed with a dangerous substance were quite high, until forensics reports indicated it was apple cider vinegar: