In January of next year, the relaxed regulatory environment that has been tailor-made for Wall Street over nearly two years of Trump's administration faces a reversal.
On November 4, according to CCTV reports, multiple U.S. media outlets projected that the Democratic Party defeated the Republican Party in the midterm elections held on November 3, reclaiming control of both the Senate and the House of Representatives and retaking Congress.
According to Bloomberg, this decisive Democratic victory positions lawmakers such as Elizabeth Warren and Maxine Waters, both long-time advocates of strict financial regulation, to potentially helm key committees.
Warren is seen as a strong contender for the Senate Banking Committee, which oversees core financial regulators including the U.S. Securities and Exchange Commission (SEC). On the House Financial Services Committee side, Waters and Sean Casten are competing for the Democratic ranking member position. Casten has stated:
Our greatest power lies in uncovering problems through oversight tools and using the appropriations process to apply pressure.
The report notes that while Democrats may find it difficult to directly block SEC Chairman Paul Atkins and CFTC Chairman Michael Selig from advancing their regulatory agendas, frequent congressional hearings and investigations will still impose substantial pressure on the financial industry. James Maloney, managing partner at public affairs firm Tiger Hill Partners, said:
Financial regulators will be summoned to testify frequently.
Analysts suggest that from private credit and bank capital rules to cryptocurrency and prediction markets, Democrats have already laid out a dense regulatory agenda aimed squarely at the many benefits the financial industry enjoyed during the Trump era.
Private Credit: From Unbridled Growth to the Spotlight
The private credit market expanded rapidly after the 2008 financial crisis and has recently drawn outside attention after some funds restricted investor redemptions.
According to Bloomberg, Warren has written to the U.S. Treasury Department and other financial regulators requesting more stress testing of the market, warning that:
Its scale expansion could have a significant impact on the stability of the financial system and the overall health of the economy.
A previous proposal by the U.S. Department of Labor to allow more private credit and cryptocurrency into retirement savings plans has also drawn scrutiny from Waters. The proposal is widely seen as a major boon for Wall Street, potentially opening a larger market for institutions such as Blackstone Group and Apollo Global Management.
Whether Democratic oversight actions will escalate into substantive legislation remains unclear, but the likelihood of private credit industry executives being summoned to congressional hearings has risen substantially.
Bank Capital Rules: Deregulation Path May Face Resistance
On the bank regulation front, Democrats hold a strongly critical stance toward the Trump administration's plan to relax bank capital adequacy requirements, arguing that the relevant proposals could "increase the likelihood of large bank failures and ultimately trigger taxpayer-funded bailouts."
Supporters argue that moderate deregulation helps boost economic growth and enhance competitiveness, with clear divisions between the two sides.
According to reports, Warren has also called on the Department of Justice to launch a criminal investigation into Bank of America and its executives after the bank admitted to violating federal anti-money laundering laws. Bank of America was fined more than $1.21 billion by U.S. regulators last month, and the bank said it has been cooperating with regulators on financial crime compliance issues.
Prediction Markets and CFTC: Regulatory Gaps May Be Filled
The prediction market industry has risen rapidly in recent years, disrupting the traditional sports betting landscape and sparking legal disputes with multiple states, with related cases potentially reaching the U.S. Supreme Court.
Trump supports the CFTC as the sole regulator of prediction markets, and Donald Trump Jr. also serves as an advisor to Kalshi and Polymarket, creating a direct conflict of interest with the industry.
According to Bloomberg, the CFTC has recently lacked congressional oversight hearings, and after Democrats take over, the agency and its interactions with the industry are expected to face in-depth scrutiny. Polymarket said in a statement before congressional control was determined:
We welcome working with lawmakers from both parties to jointly regulate and realize the full potential of prediction markets.
Kalshi declined to comment.
According to reports, current House Oversight Committee Chairman and Republican Representative James Comer has already launched an investigation into insider trading allegations on the platforms, and the direction of that investigation remains uncertain after Democrats take over.
Some industry experts caution that while congressional letters and hearings may come in succession, Democrats' actual ability to constrain regulators' policy agendas remains limited.
Cryptocurrency: Political Headwinds and Ethical Controversies
The midterm elections were a "tough night" for the cryptocurrency industry, according to Ian Katz, managing director at Capital Alpha Partners in Washington, as the industry spent heavily to target Sherrod Brown in the Ohio Senate race but ultimately fell short.
Katz noted that the industry's image in Washington of "acting too aggressively and carrying a 'bro-culture' vibe" also proved a drag.
On the legislative front, the industry is broadly skeptical about whether the next Congress can advance new digital asset market structure legislation, after the so-called Clarity Act failed to pass the Senate.
Democrats' focus is expected to shift toward ethical controversies surrounding Trump and his family's crypto assets — Trump's reported $1.4 billion in crypto earnings had previously become a major obstacle to that legislation. Amanda Fischer, chief operating officer and policy director at Better Markets, said:
With this decisive victory, Democrats will have a mandate to focus on cost-of-living and anti-corruption issues.
In addition, the $6.3 billion hack suffered by cryptocurrency exchange Binance could also provide an opportunity for Congress to hold comprehensive hearings on digital asset cybersecurity and consumer protection.
Artificial Intelligence: A Rare Area of Bipartisan Consensus
The financing structure of the artificial intelligence industry has drawn scrutiny, with circular transaction arrangements between tech manufacturers and startups raising concerns.
As companies like Anthropic approach going public, lawmakers have called on the industry to increase transparency and disclose potential risks. Warren has also warned about the potential risks AI poses to the insurance industry, with cybersecurity being another inevitable focus.
In a sharply divided political environment, AI regulation is seen as one of the few areas where the next Congress may form bipartisan consensus. Peter Dugas, a former U.S. Treasury official and founder of the Regulatory Intelligence Group, said:
The government must address these issues in some way, otherwise they could evolve into a potential financial crisis.
Epstein Investigation: A Two-Pronged Approach, No Backing Down
After Democrats take over, the House Oversight Committee is expected to continue investigating the financial services industry's ties to convicted sex offender Jeffrey Epstein. This is also one of the few issues with bipartisan consensus.
According to reports, lawmakers have sent numerous letters to multiple Wall Street institutions demanding details of their dealings with Epstein and related individuals.
Democrats have also proposed legislation mandating that regulators publicly disclose financial records related to Epstein and his associates.
Shortly after Democrats were projected to win the House, Representative Robert Garcia issued a statement announcing he would serve as chairman of the next Congress's oversight committee, specifically mentioning work related to the Epstein files. In brief and forceful terms, he issued a warning to the financial industry:
Get your lawyers ready.
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