Bloomberg, Wall Street Bets on Tariff Refunds If Court Rules Against Trump:

Wall Street banks are arranging bets on President Donald Trump’s tariffs being struck down by the Supreme Court — long-shot trades that could pay off handsomely for hedge funds betting against the legality of the administration’s flagship policy.

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In the trades, the importing companies essentially sell to investors any future rights to claim refunds on their tariff bills, which could come if the nation’s top court sides with an ongoing legal challenge to Trump’s tariffs. The companies sell at a discount to their expected refunds, meaning investors would reap the upside in a ruling favorable to them. The banks arranging the deals take a cut.

The bets add to the existing Wall Street ecosystem that’s speculating on the Trump administration’s sweeping policy changes, in areas including trade, cryptocurrencies, energy and foreign policy. The sensitive deals hinge on the success of complex legal arguments, but could lead to bumper payouts for those placing the bets.

For example, a hedge fund might pay somewhere between 20 to 40 cents for each dollar of claims they could get back in refunds, giving them an upside of several times their bet, according to the correspondence and some of the people, who asked not to be identified discussing potential terms. Most of the trades range in size from $2 million to $20 million, with few over $100 million, one of the people said.