Almost every article on today’s tariff decision includes, somewhere two or three paragraphs down, a note which explains that it’s unclear how or whether the federal government will issue refunds for illegally collected tariffs. The Court’s decision doesn’t address this. I’m not sure why it would really need to address this. The tariffs were illegal. The government had no legal authority to collect them. So it should be a simple matter for importers to go to court and compel the government to refund their money. But set all that aside. Is it really so uncertain? I’ll bet the White House is going to find a way to issue those refunds. Why? Because Trump insiders, especially the family of Commerce Secretary Howard Lutnick, have reportedly made huge, huge bets on the tariffs being tossed. They and their clients now, per a July report that prompted a Senate investigation, stand to make tens or even hundreds of billions on those refunds. Given that Lutnick is a primary player in White House tariff policy, I’m pretty confident that they’re going to find a way to issue those refunds.
How does this work? I discussed this in a post from Sept. 1 of last year. The gist is this: When he became commerce secretary, Lutnick gifted his sons his Wall Street firm Cantor Fitzgerald. (In the link above I explained how they structured this handoff — which as a bonus allowed Lutnick to pay zero capital gains on the entire transaction.) Twenty-something failson Brandon Lutnick is now chairman of the firm. Brother Kyle, apparently another business prodigy from the same family, is vice chairman. Soon after Trump’s tariffs were announced last fall, Brandon Lutnick — no doubt in a totally, totally arms-length way — started buying up the rights to tariff refunds at about 25% of their sticker value.
I base this on reports of these trades from last summer; Wired broke the story in July. A day after the original publication of that article, Wired updated the story with a less-than-denial denial from Cantor Fitzgerald. Erica Chase, a spokesperson for Cantor, said: “Cantor is not in the business of positioning any risk or taking views in litigation claims including tariffs.”
Just this evening, after the original publication of this article, I received a statement from a Cantor press rep which states: “Cantor Fitzgerald has never executed any transactions or taken risk on the legality of tariffs. Any report suggesting otherwise is completely false.” This is a much more definitive statement than the one they released at the time. Based on this new statement, Semafor published a story this evening which takes the Cantor denial at face value and argues that the original reports were based on the claims of an over-enthusiastic Cantor salesman. To date, however, Wired has not updated or withdrawn its reporting.
To understand how transactions like the one described by Wired work, think of it like this. Corporation X pays $100 in tariffs to the federal treasury. Cantor offered them $25 for the right to collect any refund they might eventually be entitled to if the tariffs are rejected by SCOTUS. If the tariffs are overruled every quarter invested becomes a dollar.
By mid-summer, that percentage was getting closer to 30%, per that Wired report, and one imagines that the percentage went up a lot after an appellate court ruled the tariffs were illegal. It’s not clear just how many refund rights Cantor Fitzgerald bought up. And Cantor Fitzgerald now claims the whole story was based on some misunderstanding. But last July, according to Wired, Cantor Fitzgerald said it had “the capacity to buy the rights to hundreds of millions of dollars.” In other words, the payoff on these bets could be astronomical.
Keep an eye on this. There could be crazy sums at stake.
Ed. Note – 2.20.26, 9:24 p.m.: This article has been updated to incorporate Cantor Fitzgerald’s denial.
