The trajectory of banking policy and which lawmakers will lead the Senate Banking Committee and House Financial Services Committee depends on whether Democrats retain, or Republicans gain, control of the House and Senate.

Republicans are slightly more likely to take over the Senate than Democrats are to keep it and "highly likely" to take over the House, Isaac Boltansky, director of policy research at BTIG LLC, wrote in an Oct. 31 note.

Raymond James analysts made a similar prediction in a note on Nov. 2, saying there is a 55% chance of complete Republican control of Congress, a 35% chance Republicans take over the House while Democrats keep the Senate, and a 10% chance Democrats keep both chambers.

If the GOP gains a majority in either or both chambers, Republican legislators are expected to put pressure on Biden-appointed regulators through hearings or the introduction of legislation.

Expected policy focus

If Republicans take control of at least one chamber of Congress, financial services policy will shift.

Boltansky expects "aggressive" oversight of regulatory agencies that could impact regulatory agendas if Republicans take control of at least one chamber.

However, while Republicans could slow Democratic regulators' agendas, they will not "change their minds," Ian Katz, managing director at Capital Alpha Partners, said in a note Oct. 31.

On the topic of digital assets, Boltansky expects regulation by enforcement to continue and believes the next Congress could pass legislation related to stablecoins.

"With divided government expected next year, there will be a renewed effort to legislate in this space, starting with stablecoins," he wrote. "We believe there will be a viable window to legislate on stablecoins next year."

Conversely, Katz is less bullish on the prospect of cryptocurrency legislation. "We think reaching an agreement on major crypto legislation will get harder, not easier," he wrote.

On the topic of cannabis banking, Boltansky is bullish on the prospect of marijuana-related legislation during the upcoming lame-duck session. However, if no progress is made then, he expects the topic will be back off the table if Congress becomes divided.

Committee leadership

The House and Senate committees overseeing financial services issues could get a significant makeover following the election.

"It's almost certain there will be a loss of expertise in Senate Banking," with the retirement of current Ranking Member Patrick J. Toomey, R-Pa., and Sen. Richard Shelby, R-Ala., Katz wrote.

Sen. Tim Scott, R-S.C., would "almost surely" become chair of the Senate Banking Committee if his party takes control of the Senate, according to Katz.

If Scott takes the helm, he will "pay close attention to a few issues not usually associated with the GOP, such as public housing/[U.S. Department of Housing and Urban Development] and the welfare system. But he will take a conservative approach to them," Katz wrote. Further, Scott will likely have a "civil relationship" with Democrats, he said.

If Republicans gain control of the House, Rep. Patrick McHenry, R-N.C., ranking member of the House Financial Services Committee, is expected to become chairman.

"McHenry would be active and aggressive against the current group of financial regulators, but with particular venom for SEC Chair Gary Gensler and CFPB Director Rohit Chopra," Katz wrote.

The committee could take aim at Democratic moves that resulted in the exit of former Federal Deposit Insurance Corp. Chair Jelena McWilliams, the Office of the Comptroller of the Currency's approach to bank-fintech partnerships, and various CFPB actions, among other items, according to Katz.

Toss-up races

Among the five "toss-up" Senate races from the Cook Political Report, two involve current Senate Banking Committee members.

In Georgia, Republican candidate Herschel Walker is running against incumbent Sen. Raphael Warnock, D-Ga., where President Joe Biden earned a narrow victory in the 2020 presidential election. In Nevada, Republican candidate Adam Laxalt is running against incumbent Sen. Catherine Cortez Masto, D-Nev. President Biden edged former President Donald Trump in Nevada during the 2020 presidential election, 50.06% to 47.67%.

The University of Virginia's Center for Politics considered those two the only toss-up Senate races.

Among the 35 toss-up House races listed by the Cook Political Report and 20 listed by the University of Virginia, two involve seats held by House Financial Services Committee members.

The race for New York's 12th Congressional District, which is held by Rep. Carolyn B. Maloney, D-N.Y., who lost in the primary election, is considered a toss-up by the Cook Political Report, while the race for Texas' 34th Congressional District is up for grabs according to the University of Virginia.

Rep. Vicente Gonzalez, D-Texas, represents Texas' 15th Congressional District but is running for election in the 34th.