The deadline is set: federal funding lapses on Dec. 11. Without an agreement in place, all signs point toward the third federal government shutdown of the year. With each passing day lacking a resolution, the odds of a funding lapse surge across prediction markets.
Today, we break down the current shutdown odds and what's actually stalling the political negotiations.
Government Shutdown Odds Today
Looking at the contract curve tracking Dec. 12 government shutdown odds is enough to give you whiplash. In the span of a single week, implied probabilities swung violently from a high of 45% to a low of 27% at breakneck speed. This morning, the market opened at 35% before rallying back toward 43%. Volatility is the name of the game.
Traders are well aware that federal funding lapses on Dec. 11 and that lawmakers remain far from reaching a deal to avoid a shutdown. The roadblocks standing in the way of an agreement are substantial, and with each passing day, the odds of a funding lapse will continue to surge.
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Congress Returns For a Five-Week Lame-Duck Session
With current government funding scheduled to lapse on Dec. 11, lawmakers face the challenge of negotiating in record time. They need to pass another continuing resolution (CR) or a full-year spending package to avoid a partial or full government shutdown.
Beyond spending fights, the session’s calendar is packed with crucial legislative items, including the annual National Defense Authorization Act (NDAA), reauthorization of the Farm Bill, and critical emergency disaster relief funding.
Also, the post-election dynamic adds significant friction. Departing lawmakers have diminished leverage, while party leadership must balance compromises against the political priorities of the incoming Congress.
Fiscal conservatives are already pressing to kick final spending decisions into early next year, setting up an intense partisan clash over federal agency funding levels and policy riders before the holiday recess.
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What’s Blocking a Deal: Iran War Funding And The NDAA
The primary obstacle stalling year-end spending negotiations centers on an escalating clash over Middle East military appropriations and contentious policy riders tacked onto the NDAA.
Lawmakers from both parties are pushing for expanded emergency supplemental funding directed at naval deployments and regional defense operations in response to Iranian aggression. However, this effort faces fierce resistance from two fronts: progressive factions looking to prevent further friction in a broader regional conflict, and fiscal conservatives determined to block foreign defense spending until domestic fiscal priorities are put in order.
With defense policy inextricably linked to the broader spending package, the impasse threatens to drag the entire federal appropriations process over the fiscal cliff. Unless leadership separates Middle East deterrence funding into an independent measure, congressional appropriators will remain unable to finalize statutory top-line numbers before funding runs out.
How the Hegseth Impeachment Vote Could Complicate Negotiations
Amid these fiscal debates, a parallel agenda is generating lots of noise on Capitol Hill. Defense Secretary Pete Hegseth is facing an impeachment pushed by Republican Representative Thomas Massie, setting up a high-stakes floor vote in the House of Representatives.
While Hegseth has dismissed the effort as a mere “political spectacle,” the fallout could directly derail delicate negotiations and trigger a federal government shutdown.
That standoff not only consumes valuable time, but also hardens partisan battle lines and eliminates the goodwill required to solve complex compromises on year-end funding packages and the NDAA.
Right now, the Kalshi contract tracking the timeline for Defense Secretary Pete Hegseth’s potential impeachment lists “by July 1, 2027” and “by Jan 1, 2027” as the favorite outcomes, trading at 90% and 70% implied odds, respectively. In third place, “by Nov 21, 2026” sits at 66% odds.
Two Shutdowns Already in 2026
Fiscal battles in 2026 have already triggered two federal government shutdowns, leaving Congress with little margin for error ahead of the December 11 funding deadline.
The first lapse, a brief four-day partial shutdown from January 31 to February 3, arose from an impasse over final annual appropriations packages and policy riders.
Less than two weeks later, an escalated standoff over immigration enforcement reforms and Department of Homeland Security funding ignited a record-shattering 76-day partial shutdown running from February 14 to April 30.
