Analysis of Section 301c Refund Rights and Market Overlay

Success is capital, analysis, and execution.

It's boring for some (Alex Skarsgård), but the execution of this combination to the best of one's ability is the task that we all, as businessmen, strive to do.

Note: This analysis was covered by US Finance Moves.

LBOs. Spinoffs. Special Situations.

The words change, but the process is still the same. You are still on the same set of rails wherever you go in finance, so you better start getting used to navigating them.

The Situation

An interesting case that came across my desk was the proposition of refund rights from the recent tariffs imposed on U.S. manufacturers and importers. Most were received with disgust, but the most contentious of them all was of course the China tariffs — the egregious Section 301c, 100%+ rate tariffs.

The tariffs weren't suggestive or performative. They were implemented, paid, and continued to be paid by increasingly upset U.S. firms.

This set two things in motion:

• A scathing lawsuit against the U.S. that put the tariffs on the constitutional challenge track (arguing they were unconstitutional).
• A separate lawsuit by a toy firm on the trade law challenge track (arguing a violation of IEEPA).

The administration leaned hard on both, granting stays and appeals, but the litigation still moves forward.

The Action

Purchase the rights to possible Section 301c refunds.

Payoff: Firms would receive refunds, in force, for all tariffs paid from the beginning of implementation through final decision.

Timeframe: With a 90th percentile range, analysis suggests both cases ultimately reach certiorari (Supreme Court), extending the timeline to roughly 12–15 months.

Risk: The Supreme Court could rule the tariffs were legal, wiping out the capital invested in purchased rights.

Other branches (dismissals or lower-court rulings) shorten the path but do not change the ultimate payoff distribution.

Structuring the Trade

The risk-averse trade is a purchase of these rights where your internal probability of refund > 50%, net of legal/operational costs.

That makes it a positive-EV setup, not a guaranteed win. Over time, expectancy tilts positive if the odds are accurately estimated and disciplined sizing is applied.

Overlay With Prediction Markets

The challenge is drawdown. If rights go to zero, CAGR collapses. Enter the hedge: prediction markets (e.g., Kalshi, Polymarket).

By overlaying contracts on "Tariffs struck down" vs. "Tariffs upheld," you can smooth returns.

Example: Hypothetical Numbers

Base Rights Trade

Purchase $1,000,000 of refund rights at 30¢ on the dollar (implied value of $3,333,333 if successful).

• If SCOTUS rules for refunds: return = +$2,333,333 profit.
• If SCOTUS upholds tariffs: return = –$1,000,000 (total loss).

Overlay With Prediction Markets

Add $200,000 in Kalshi contracts at odds 25% refund / 75% no-refund.

Payout = $1 contract pays $1 if correct.

Scenario A (Profitable):

SCOTUS rules for refunds.

• Rights: +$2,333,333.
• Contracts: Lose $200,000 (betting partial hedge against refund).
• Net profit = $2,133,333. CAGR boosted, Sharpe intact.

Scenario B (Non-profitable):

SCOTUS upholds tariffs.

• Rights: –$1,000,000.
• Contracts: Win $600,000 (because $200k at 75% no-refund pays $800k, minus stake).
• Net loss = –$400,000. Damage controlled, downside hedged.

Closing Thought

This is not certainty, but it is positive expectancy with hedged distribution tails. The expected value math is what counts, and the combination of refund rights plus prediction contracts creates a portfolio with tolerable downside and high optionality upside.