They are betting against Trump’s tariffs. Now they are ready to make millions

Investment companies are is on track to get a massive payday after the U.S. Supreme Court (SCOTUS) struck down President Donald Trump’s landmark tariff policy on Friday.

When Trump imposed sweeping tariffs on foreign goods last April, hedge funds and investment firms began betting on the possibility that the courts would rule that he had violated the law. They did this by purchasing the right to draw back notional tariffs for cents on the dollar from distressed importers who wanted to exchange the possibility of drawing back tariffs in the future for immediate cash payment.

“We were like [Trump] “The law is being applied capriciously,” says Thomas Brazile, founder of investment firm 117 Partners, who says he has bought $925,000 worth of tariff clawback claims with his own money. “That was the play.”

This trade was brokered by a variety of Wall Street firms. Although only a few hedge funds participate in this trade, those that do have generally bought claims worth tens of millions of dollars, says Neil Seiden, president of Asset Enhancement Solutions, a brokerage. “They didn’t want to deal with anything small,” Seiden says.

After SCOTUS ruled it was illegal for Trump to impose tariffs under the International Emergency Economic Powers Act (IEEPA) — the law used to justify broad Emancipation Day tariffs — traders betting against him are on track to double their stake. Brazil says it will deliver more than eight times the return.

However, although SCOTUS ruled that IEEPA’s tariffs were unlawful, it did not explicitly address whether the government would be required to issue refunds. “That’s the billion-dollar question,” Seiden says. “Everyone is in a constant state of flux.”

The issue of refunds will come back to the lower courts, says Lawrence Friedman, a partner at the law firm Barnes Richardson. Even then, he says, the administration may choose to appeal any lower court ruling requiring the government to refund tariff payments. “The president doesn’t like local courts issuing nationwide injunctions,” Friedman says.

In response to a question about the possibility of a tariff refund on Friday, Trump said: “I think it should be sued.” The White House did not respond to another request for comment.

The prevailing uncertainty puts investment firms holding clawback claims in a dilemma: Should they keep some of the gains by transferring the claims to another buyer, or wait out the legal hassles? “Trump is Trump, man,” Brazile says. “I’m not sure you want to be on the other side of it, no matter how good the legal arguments are.”

Ultimately, Friedman says, “it’s a much better day than it was yesterday,” for any hedge funds that took over the trade and importers who chose not to sell their clawback claims. “I think it is very unlikely that refunds will not be granted.”