diff --git a/swap/src/protocol/alice/swap.rs b/swap/src/protocol/alice/swap.rs
index 55c305a2..4a767c79 100644
--- a/swap/src/protocol/alice/swap.rs
+++ b/swap/src/protocol/alice/swap.rs
@@ -290,22 +290,30 @@ async fn run_until_internal(
                 state3.B,
             )?;
 
-            let punish_tx_finalised = async {
+            let punish = async {
                 let (txid, finality) = bitcoin_wallet.broadcast(signed_tx_punish, "punish").await?;
-
                 finality.await?;
 
                 Result::<_, anyhow::Error>::Ok(txid)
-            };
+            }
+            .await;
 
-            let tx_refund = state3.tx_refund();
-            let refund_tx_seen =
-                bitcoin_wallet.watch_until_status(&tx_refund, |status| status.has_been_seen());
+            match punish {
+                Ok(_) => AliceState::BtcPunished,
+                Err(e) => {
+                    tracing::warn!(
+                        "Falling back to refund because punish transaction failed with {:#}",
+                        e
+                    );
 
-            select! {
-                result = refund_tx_seen => {
-                    result.context("Failed to monitor refund transaction")?;
+                    // Upon punish failure we assume that the refund tx was included but we
+                    // missed seeing it. In case we fail to fetch the refund tx we fail
+                    // with no state update because it is unclear what state we should transition
+                    // to. It does not help to race punish and refund inclusion,
+                    // because a punish tx failure is not recoverable (besides re-trying) if the
+                    // refund tx was not included.
 
+                    let tx_refund = state3.tx_refund();
                     let published_refund_tx =
                         bitcoin_wallet.get_raw_transaction(tx_refund.txid()).await?;
 
@@ -315,15 +323,13 @@ async fn run_until_internal(
                         state3.a.clone(),
                         state3.S_b_bitcoin,
                     )?;
+
                     AliceState::BtcRefunded {
                         spend_key,
                         state3,
                         monero_wallet_restore_blockheight,
                     }
                 }
-                _ = punish_tx_finalised => {
-                    AliceState::BtcPunished
-                }
             }
         }
         AliceState::XmrRefunded => AliceState::XmrRefunded,