The next "black swan" – "tariff refund big deal," Wall Street and individual investors are betting

A legal showdown that could force the U.S. government to refund hundreds of billions of dollars in tariffs is giving rise to a unique speculative market. U.S. Treasury Secretary Janet Yellen recently acknowledged in a media interview that if the Supreme Court rules that some tariffs imposed by the Trump administration are illegal, the Treasury Department may have to refund "about half of the tariffs," which she described as a "terrible" blow to the Treasury. When asked if the government was prepared to issue refunds, Yellen responded, "If the court says so, we have to do it." The backdrop to this statement is that two lower courts have ruled that the Trump administration lacked legal authority to impose certain tariffs under the International Emergency Economic Powers Act. The case has now been appealed to the Supreme Court, with oral arguments scheduled for November 5. According to data from U.S. Customs and Border Protection, as of August this year, the disputed tariffs have exceeded $70 billion, and if the ruling ultimately overturns this policy, the resulting chain reaction will have profound implications for U.S. finances and import businesses. Faced with significant uncertainty, the market has not waited. From structured products at Wall Street investment banks to online prediction platforms, a "pricing" mechanism around the outcome of the tariff ruling has already formed. Investors are betting real money on whether the U.S. Treasury will execute an unprecedented "tariff refund." Wall Street's Big Bet: Building a Massive Tariff Refund Claim Market Wall Street Journal previously mentioned that for professional investors on Wall Street, this gamble is unfolding in a more traditional and large-scale financial transaction format. According to media reports, investment banks including Jefferies and Oppenheimer are actively facilitating a special transaction: connecting importers who have paid high tariffs with investors seeking high returns (mainly hedge funds). The core logic of the transaction is that cash-strapped importers sell their future "potential" tariff refund claims to investors at a significant discount. An Oppenheimer promotional material points out that this scheme can "eliminate the uncertainty of the outcome and immediately obtain guaranteed payment without waiting for the court's final ruling." Reportedly, investors typically buy the claim rights for 20 to 40 cents on the dollar. This means that once the Supreme Court's ruling is favorable to them, they will receive several times their original investment in return. Most transactions range from $2 million to $20 million, with a few exceeding $100 million. Oppenheimer's materials show that its team has arranged over $1.6 billion in similar transactions around early tariffs since 2021. Notably, the investment bank Cantor Fitzgerald, led by the son of U.S. Commerce Secretary Gina Raimondo, also considered arranging such transactions earlier this year. However, according to media reports in August, the company halted related business before executing any transactions Retail Investors' Calculation: Predicting Small Bets in the Market Unlike institutional investors who engage in customized trades worth millions of dollars, individual investors participate in this game through 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?" The contract prices on these platforms are seen as a direct reflection of the market's probability of an event occurring. According to Bloomberg columnist Matt Levine, the trading price of the relevant contracts is about 40 cents, which directly translates to the market's implied probability—that is, the likelihood of the tariff policy being upheld by the Supreme Court is approximately 40%. However, the limitations of this approach are also quite evident. As of now, the total trading volume of the relevant contracts on Kalshi is less than $250,000, while Polymarket is under $400,000. Analysis indicates that these markets have extremely low liquidity, which is completely inadequate to meet the needs of enterprise-level investors looking to hedge millions of dollars in risk exposure. Therefore, prediction markets in this event serve more as a barometer of public opinion or sentiment rather than an effective risk transfer tool. Success or Failure Depends on the Supreme Court's Ruling The success or failure of all bets ultimately hinges on the Supreme Court's ruling. Analysis suggests that the court's decision will not only depend on the interpretation of legal texts but may also be influenced by the judges' views on executive power. Trump himself has always favored the revenue brought by tariffs and believes that being forced to refund would be 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 warn that returning tax payments will be a "logistical nightmare." The U.S. Customs and Border Protection only refunds registered importers, and for many small and medium-sized importers who handle customs clearance and tariff payments through commercial carriers like FedEx and UPS, providing detailed documentation for each shipment to apply for refunds will be an extremely complicated process. This also adds another layer of execution risk for investors who have already purchased claims