Under existing federal statutes, arbitrage, as it applies to state and local governments is

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Under existing federal statutes, arbitrage is legal in some circumstances, but the government may be required to remit arbitrage earnings to the federal government. This typically involves the use of tax-exempt bonds issued by state and local governments, where the earnings from investing the bond proceeds at a higher rate than the interest rate paid on the bonds is known as arbitrage. However, federal law limits the amount of arbitrage earnings that can be retained by state and local governments and may require them to pay a rebate to the federal government.

Under Existing Federal Statutes, Arbitrage, as It Applies to State