The next "black swan"—"the big tariff rebate deal," Wall Street and individual investors are placing their 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 Bentsen recently openly admitted in a media interview that, if the Supreme Court rules that some of the Trump administration’s tariffs are illegal, the Treasury Department may have to refund “about half of the tariffs.” He described it as a “terrifying” blow to the Treasury. When asked whether the government is ready to refund, Bentsen replied: “If the court says so, we have to do it.” This statement comes after two lower courts have already ruled that the Trump administration invoked the International Emergency Economic Powers Act to impose certain tariffs without legal authorization. The case is now before the Supreme Court, with oral arguments scheduled for November 5. According to data from U.S. Customs and Border Protection, by August of this year, more than $70 billion in disputed tariffs had been collected. Should the policy be overturned, the resulting chain reaction would have profound effects on U.S. finances and importing companies. Faced with tremendous uncertainty, the market hasn’t waited. From Wall Street’s structured products to online prediction platforms, a “pricing” mechanism for the outcome of the tariff decision has already emerged. Investors are betting real money on whether the U.S. Treasury will carry out an unprecedented “massive tariff refund.” Wall Street’s big bet: building a market for massive tariff refund claims As noted earlier by Wallstreetcn, for professional Wall Street investors, this bet is being carried out through more traditional and large-scale financial trades. Media reports indicate that investment banks including Jefferies and Oppenheimer are actively arranging a special transaction: connecting importers who have paid high tariffs with investors seeking high returns (mainly hedge funds). The crux of the deal is that cash-strapped importers sell their future, “potential” tariff refund claims to investors at a steep discount. An Oppenheimer pitch contends that this structure “eliminates uncertainty and provides immediate guaranteed payment, without having to wait for a final court ruling.” Reportedly, investors typically buy $1 worth of claim rights for just 20 to 40 cents. This means that if the Supreme Court rules in their favor, they will receive returns several times their original investment. Most transactions range from $2 million to $20 million, with a few exceeding $100 million. Oppenheimer’s materials show its team has arranged over $1.6 billion in similar deals around early tariffs since 2021. Notably, Cantor Fitzgerald, the investment bank run by the son of U.S. Commerce Secretary Lutnick, reportedly considered such deals earlier this year. However, media reports say the firm halted related activities before closing any deals. Retail investors’ strategies: small bets on prediction markets Unlike institutional investors’ multimillion-dollar tailored transactions, individual investors are participating via emerging prediction markets. On platforms like Kalshi and Polymarket, anyone can make small bets on questions such as “Will the Supreme Court uphold the tariffs?” Contract prices on these platforms are seen as a direct reflection of the market’s perceived probability of an event. According to Bloomberg columnist Matt Levine, relevant contracts are trading around 40 cents, which translates into a market-implied probability—the chance the Supreme Court upholds the tariff policy is about 40%. However, this approach has obvious limitations. To date, related contracts on Kalshi total less than $250,000 in trading volume, while Polymarket’s counterpart is less than $400,000. Analysis suggests that liquidity in these markets is extremely low and cannot satisfy corporate investors’ needs to hedge multimillion-dollar risks. Therefore, prediction markets mainly act as a barometer of public sentiment rather than an effective risk transfer tool in this event. Outcome hinges on the Supreme Court’s ruling The success or failure of all bets ultimately depends on the Supreme Court’s decision. Analysts believe the court’s verdict will depend not only on interpretations of the law but may also be influenced by justices’ views on executive power. Trump himself has always favored the income from tariffs and claims that being forced to refund them would be a “disaster” for the country. Even if the Supreme Court ultimately rules the tariffs illegal, the refund process will be anything but smooth. Customs and trade experts warn that returning the money would be a “logistical nightmare.” U.S. Customs and Border Protection will only refund registered importers, but for the many small- and medium-sized importers who process customs clearance and pay tariffs via commercial carriers like FedEx and UPS, providing detailed documentation for each shipment to apply for refunds would be extremely complicated. This adds another layer of execution risk for investors who have already bought the claims. Risk Disclosure and Disclaimer Markets have risks, and investment should be approached with caution. This article does not constitute personal investment advice and has not considered individual users’ unique investment goals, financial situations, or needs. Users should consider whether any opinions, viewpoints, or conclusions here suit their particular circumstances. All investments made are at your own risk.