The Next ‘Black Swan’ – ‘Big Tariff Refund Deal,’ Wall Street and Individual Investors Are Placing Bets

A legal showdown that could force the U.S. government to refund tens of billions of dollars in tariffs is giving rise to a unique speculative market.

U.S. Treasury Secretary Bessent recently acknowledged in a media interview that if the Supreme Court rules that part of the Trump administration’s tariffs were illegal, the U.S. Treasury may have to refund “about half of the tariffs,” which he described as a “terrible” blow to the Treasury. When asked whether the government was prepared for a refund, Bessent responded: “If the court says so, we have to do it.”

This statement comes against the backdrop of two lower courts ruling that the Trump administration lacked proper legal authorization to impose certain tariffs under the International Emergency Economic Powers Act. The case has now been appealed to the Supreme Court and is scheduled for oral arguments on November 5.

According to data from U.S. Customs and Border Protection, as of August this year, the disputed tariffs have generated more than $70 billion. If the ruling ultimately overturns the policy, the resulting ripple effects will have profound implications for U.S. finances and importing businesses.

Faced with significant uncertainty, the market is not waiting. From structured products offered by Wall Street banks to online prediction platforms, a “pricing” mechanism centered around the tariff ruling outcome has already taken shape. Investors are placing real bets on whether the U.S. Treasury will execute an unprecedented “massive tariff refund.”

Wall Street’s High-Stakes Gamble: Building a Massive Tariff Refund Claims Market

As previously noted by Wall Street Wisdom, for professional investors on Wall Street, this gamble unfolds through a more traditional and large-scale financial transaction format.

According to media reports, investment banks including Jefferies and Oppenheimer are actively facilitating a special type of transaction: connecting importers who have paid hefty tariffs with investors (primarily hedge funds) seeking high returns.

The core logic of the transaction is that cash-strapped importers sell their future “potential” tariff refund claims at a steep discount to investors in advance. A promotional document from Oppenheimer notes that this solution can “eliminate uncertainty about the outcome and provide immediate guaranteed payment without waiting for the court’s final ruling.”

According to reports, investors typically purchase claims at a price of 20 to 40 cents per dollar. This means that if the Supreme Court’s ruling is in their favor, they stand to gain returns several times their initial investment.

The majority of transactions range between $2 million and $20 million, with a few exceeding $100 million. Materials from Oppenheimer indicate that its team has arranged over $1.6 billion in similar deals centered around earlier tariff arrangements since 2021.

Notably, Cantor Fitzgerald, the investment bank led by the son of U.S. Commerce Secretary Lutnick, also considered arranging such transactions earlier this year. However, according to an August report, the firm halted the business before executing any trades.

Retail Investors’ Calculations: Predicting Small Bets in the Market

Unlike institutional investors who engage in customized transactions worth millions of dollars, individual investors participate in this game through emerging prediction markets. On platforms such as Kalshi and Polymarket, anyone can make small bets on questions like ‘Will the Supreme Court uphold the tariffs?’

The contract prices on these platforms are seen as a direct reflection of the market’s assessment of the probability of an event occurring. According to observations by Bloomberg columnist Matt Levine, the relevant contracts are trading at approximately 40 cents, which translates directly into an implied market probability — i.e., a 40% chance that the tariff policy will be upheld by the Supreme Court.

However, the limitations of this approach are also quite evident.

As of now, the total trading volume of related contracts on Kalshi is less than $250,000, while on Polymarket it is under $400,000. Analysis suggests that liquidity in these markets is extremely low, completely insufficient to meet the needs of corporate-level investors seeking to hedge risks amounting to millions of dollars. Therefore, prediction markets in this case function more as a barometer of public opinion or sentiment rather than as an effective risk-transfer tool.

Success or Failure Hinges on the Supreme Court’s Decision

The outcome of all bets ultimately hinges on the Supreme Court’s decision.

Analysts believe that the court’s ruling may not only depend on the interpretation of legal provisions but could also be influenced by the judges’ views on executive power. Trump himself has consistently favored the revenue generated from tariffs and considers being forced to issue refunds a “disaster” for the country.

Even if the Supreme Court ultimately rules the tariffs illegal, the refund process will not be straightforward. Customs and trade experts have warned that the repayment of duties would be a “logistical nightmare.” U.S. Customs and Border Protection will only refund registered importers, and for the many small and medium-sized importers who handle customs clearance and tariff payments through commercial carriers such as FedEx and United Parcel Service, providing detailed documentation for each shipment to apply for refunds will be an extremely complex process.

This also adds another layer of execution risk for investors who have already purchased claims.