Stay on top of regulatory updates taking place throughout various jurisdictions across the globe.

Sen. Thom Tillis’s Tackling Predatory Litigation Funding Act, now folded into the Senate Finance Committee’s draft reconciliation package, would graft a stand-alone Chapter 50B onto the Internal Revenue Code and impose a punishing 40.8 percent flat levy on “qualified litigation proceeds.” The Schulte Roth & Zabel (SRZ) alert warns that the proposal overrides flow-through taxation, sweeps in virtually any entity—from partnerships and S-corps to sovereign wealth funds—and could chill ordinary-course lending by labeling collateralized credit facilities as “litigation financing agreements.”

A LinkedIn post from SRZ partner Boris Ziser underscores the breadth of the draft: the tax would hit domestic and foreign investors alike, deny offsetting losses, and trigger a 20.4 percent withholding obligation on plaintiffs and law firms that disburse any proceeds. Exemptions are narrow—fundings under $10,000 or debt-like arrangements capped at the greater of 7 percent or twice the 30-year Treasury yield—while long-standing preferences such as the portfolio-interest exemption and sovereign immunity would be swept aside. SRZ calculates that investors routing recoveries through a corporation could face an effective federal rate approaching 65 percent after dividend taxation, and even partnership structures would see double taxation because partners’ basis would not increase for proceeds taxed at the entity level.

Beyond funders, the bill’s catch-all definition of “litigation financing agreement” risks ensnaring securitizations, DIP financings, subrogation purchases, and other credit instruments whenever a borrower is a named litigant. By applying to taxable years beginning January 1, 2026—without grandfathering—it could retroactively erode returns on capital already deployed.

What it means for the market: If this language survives reconciliation, funders may rethink U.S. deployment models, while credit investors could demand covenants shielding them from inadvertent 40.8 percent exposure. The proposal also revives the broader policy debate: will Washington’s next move be bespoke tax regimes for other “disfavored” financial niches, or a push toward clearer, industry-wide regulation?

Sen. Thom Tillis (R-NC) has sparked a fierce backlash from MAGA influencers online, who are taking issue with Sen. Tillis’ newly introduced legislation that aims to slap a 41% tax on third-party litigation finance agreements. Critics warn the measure would effectively choke off capital that plaintiffs rely on to challenge deep-pocketed corporations, tilting the playing field back toward defendants.

An article in the Daily Caller argues the proposal “hogties” a tool that ordinary Americans use to combat what author Will Hild brands “woke capitalism.” By raising the cost of capital, the bill could dissuade funders from backing suits against headline-making defendants—Bank of America, Uber and Nationwide are cited as companies that stand to gain if litigation funding dries up.

The Daily Caller’s article was quickly snapped up by a cadre of right-wing influencers who have begun sounding off on the alleged harms this bill would cause for ordinary Americans.

Robby Starbuck, the influential ‘anti-woke’ crusader, posted on X: “How does a little guy stand any chance if they go up against a woke megacorp? Nearly the only way is litigation financing where a wealthy 3rd party funds the suit. As written now @SenThomTillis’ bill is a mega corporations dream.”

Jenna Ellis took things a step further, accusing Sen. Tillis of deception: “Tillis has deceptively marketed his bill as taxing “foreign” litigation funding — when in reality it subjects all litigation funders to a 41% levy — intended to drive away investors. The effect would be that Americans fighting woke corporations will lose one of the few tools needed to fight back.”

Kurt Schlichter added: “Every American has a right to bring a lawsuit. It’s nobody’s business how they fund it. And lawsuits are hugely expensive. This is a way to keep people from suing – it doesn’t start bad lawsuit. It stops good ones.”

It seems we have a mini-Republican civil war brewing over the issue of legal funding. Sen. Tillis is a Republican, but that hasn’t stopped the MAGA faithful from backing legal funding in a bit to help them take down ‘woke corporations.’

LFJ will continue to follow this story as it develops.

The U.S. litigation finance sector may soon face a substantial tax hike under a proposal folded into the latest version of Senate Republicans’ tax and healthcare legislation. The provision, championed by Senator Thom Tillis (R-NC), introduces a 41% levy on profits from litigation finance investments—a move projected to raise $3.5 billion over a decade.

An article in Bloomberg Law details how the measure was added to President Trump’s budget bill (H.R. 1) and could significantly deter investor interest in the $15.2 billion industry. Investors, who back lawsuits in exchange for a cut of potential settlements or verdicts, value litigation finance for its uncorrelated returns. But critics, including the U.S. Chamber of Commerce, argue the practice inflates settlement values and prolongs litigation timelines.

The International Legal Finance Association (ILFA), the industry’s leading trade body, is actively opposing the Tillis proposal. ILFA argues that the measure would stifle access to justice by disincentivizing critical funding for claimants unable to afford litigation. The tax plan, while currently included in the bill, is far from finalized: Senate negotiations remain ongoing, and any final version must still be reconciled with the House’s earlier passage.

What makes the Tillis approach noteworthy is its departure from previous regulatory efforts focused on disclosure requirements. Instead, it leverages the tax code to curb litigation funding indirectly—prompting alarm across the industry. According to attendees at a recent litigation finance conference in New York, the proposal has already triggered coordinated responses among major funders, including efforts to boost ILFA membership and advocacy.

The proposed tax underscores a renewed push to rein in litigation finance via unconventional channels. As political winds shift, funders may need to rethink their strategies—not only to protect investor returns, but also to defend the sector’s role in enabling access to the courts.

A shadowy new television ad has thrown fresh fuel on the fire surrounding third-party litigation funding, signaling a sharp escalation in efforts to reshape the industry’s tax treatment. The 60-second spot, airing nationally, takes aim at litigation financiers and the plaintiffs’ bar, aligning with a Republican-backed push to impose a steep 41% tax on litigation finance profits through an upcoming federal appropriations bill.

According to Bloomberg Law, the ad features dramatic visuals and pointed messaging designed to raise public concern about the role and influence of litigation funders in the civil justice system. While the ad does not disclose its sponsor, its timing and tone suggest it is part of a coordinated campaign to build momentum behind proposed tax reforms that would treat funder profits as ordinary income rather than capital gains.

At the heart of the policy debate is whether litigation funders should continue to benefit from preferential tax rates typically reserved for long-term investment income. Proponents of the tax hike argue that funders are not passive investors but active participants in the legal process who should face a higher tax burden. Critics, meanwhile, warn that the proposal would discourage funding for meritorious claims and restrict access to justice, especially in costly litigation where plaintiffs cannot afford to proceed without external financing.

The ad spot represents a new front in the political battle over litigation finance, which has faced increasing scrutiny from lawmakers, regulators, and industry opponents. It follows recent moves by groups like the American Property Casualty Insurance Association, which have endorsed similar tax reforms aimed at reining in the sector.

The American Property Casualty Insurance Association (APCIA) has thrown its support behind the “Tackling Predatory Litigation Funding Act,” a proposed bill aimed at increasing tax and regulatory scrutiny of third-party litigation funders. APCIA is advocating for the legislation’s inclusion in the federal reconciliation package, underscoring the insurance industry’s mounting concern over the financial and legal impact of third-party litigation funding (TPLF).

An article in Insurance Business Magazine reports that the APCIA is backing the measure as part of its broader efforts to rein in what it views as predatory funding practices. The association argues that TPLF arrangements can distort the legal process by incentivizing unnecessary litigation, driving up settlement costs, and fostering conflicts of interest between funders and claimants.

The proposed legislation would require litigation funders to pay taxes on returns previously treated as capital gains, thereby classifying their profits more akin to business income. This shift could significantly affect the financial calculus for funders, particularly those operating in high-volume, high-return sectors of mass tort and class action litigation.

The APCIA’s stance aligns with a broader pattern of resistance from the insurance industry, which has increasingly blamed litigation funding for contributing to “social inflation”—the rising costs of claims due to expanded legal theories and larger jury awards. With the insurance lobby stepping up its pressure, this bill could serve as a litmus test for how the federal government chooses to address the growing influence of litigation finance.

If passed, the legislation could reshape the risk-reward profile for funders and usher in a new era of compliance obligations. The legal funding industry will be watching closely to see whether this signals the start of a more aggressive regulatory push from Washington.

A panel convened by S&P Global has flagged litigation funding as a growing concern for casualty insurers, warning that its rapid rise could be fueling systemic inefficiencies and potential abuse in the legal system.

An article in Reuters details the findings from an S&P insurance panel that expressed concern over how the increasing role of third-party litigation funding is contributing to the volume and aggressiveness of legal claims. Panelists noted that while there is “no sign of the apocalypse,” litigation funders’ influence is prompting a cautious stance from casualty insurers, who are facing escalating claim costs, longer litigation cycles, and a rising number of so-called nuclear verdicts.

The panel advocated for comprehensive tort reform, citing litigation funding as a key driver of what they see as a dysfunctional tort system. They warned that without structural legal changes, insurance markets could see greater volatility and pricing pressure. While the exact impact of litigation funding on claims frequency remains contested, S&P analysts are increasingly viewing it as a structural headwind for insurers navigating a tougher underwriting environment.

The remarks come amid broader industry scrutiny of litigation finance’s influence on legal outcomes and market dynamics. With funders enabling claimants to pursue extended or higher-value litigation, insurers argue the funding model skews incentives and inflates settlements. Calls for greater transparency around funding arrangements and closer regulatory oversight are growing louder within insurance circles.

This latest critique adds momentum to the ongoing debate over litigation finance’s long-term impact. As third-party funding becomes more entrenched across jurisdictions, questions remain about how insurers, lawmakers, and courts will respond—and whether litigation finance will continue reshaping the contours of legal risk.

Tensions between the litigation finance and insurance sectors escalated this week, as Burford Capital accused insurance giant Chubb of anti-competitive conduct for allegedly blacklisting entities affiliated with litigation funders. The clash centers on Chubb’s reported efforts to pressure law firms, brokers, and asset managers to distance themselves from litigation finance players, claiming such associations encourage excessive litigation.

An article in the Financial Times reports that Chubb, one of the world’s largest commercial insurers, has taken a hardline stance against third-party litigation funding (TPLF). The insurer allegedly warned that business relationships with firms connected to litigation funding could jeopardize access to its insurance services. In response, Burford Capital, the world’s largest litigation financier, has challenged Chubb’s actions as potentially violating antitrust laws by leveraging its dominant market position to suppress competition and restrict access to legal finance.

Burford argues that litigation funding serves a critical role in facilitating access to justice, especially for under-resourced claimants confronting well-capitalized defendants. The firm emphasized the legality of TPLF arrangements and framed Chubb’s actions as an overreach aimed at stifling a legitimate and growing financial sector. The dispute highlights deepening fault lines between two industries with starkly divergent views on the societal and economic impacts of litigation funding.

This confrontation arrives amid heightened scrutiny of TPLF, with insurers and some policymakers portraying it as a driver of “social inflation”—increased litigation costs and larger jury verdicts. Funders, on the other hand, maintain that these claims are overblown and self-serving.

The implications for legal finance are significant. If Chubb’s actions prompt regulatory review or litigation, it could shape the future of insurer-funder relations and the broader policy environment for litigation finance. The episode also raises the question: will other insurers adopt similarly aggressive stances, or will Burford’s challenge curb the momentum of this growing backlash?

In a significant policy shift, Oklahoma has enacted legislation targeting foreign influence in its judicial system through third-party litigation funding. Signed into law by Governor Kevin Stitt, the two-pronged legislation…

A new report from the Insurance Information Institute (Triple-I) is drawing attention to the growing intersection between third-party litigation funding, mass tort advertising, and rising insurance costs. The report argues…

In the six months since the Civil Justice Council published its Interim Report and Consultation on litigation funding, the industry has waited patiently to see what shape its final recommendations…

With the UK funding industry awaiting the outcome of the Civil Justice Council’s review of third-party litigation funding, most of the commentary about what direction the government should take has…

As LFJ has covered over recent months, the movement to limit the use of third-party litigation funding or to impose restrictions on the practice has seen several successes with state…

As we approach the beginning of summer, the litigation funding industry is growing impatient in waiting for the outcome of the Civil Justice Council’s (CJC) review of litigation funding, with…

Following a 2022 report from New Zealand’s Law Commission, there has been a distinct lack of action by successive governments to introduce a Class Actions Act or any forms of…

A statement released by Litigation Capital Management (LCM) offers a response to recent media speculation that the funder is facing a potential investigation by the office of the Dubai Public…

Although the presence and visibility of legal funding in India is limited, a recent judgment re-affirming the legality of litigation funding will no doubt be seen as a positive sign…

Among the criticisms leveled at the legal funding industry, one critique that has gained significant traction lately in the United States is the idea that the funding of patent infringement…

With the growing prominence of third-party funding in arbitration proceedings, industry bodies are keen to establish best practices for those involved in funded matters, and to increase the broader levels…

Following the signing of a bill by Georgia’s Governor earlier this month on regulating litigation funding, industry observers are eyeing which state will be the next to expand its oversight…

As LFJ covered at the end of last month, the first quarter of 2025 had already demonstrated the momentum behind legislative initiatives at the state level aimed at regulating the…

Dubai has enacted Law No. (2) of 2025 which cements the role of the DIFC Courts as a forum for cross-border litigation and arbitration. According to the Government of Dubai’s Official…

Whilst many state legislatures across the U.S. are moving forward with bills imposing blanket restrictions and oversight measures on litigation funding, one state has demonstrated that there is the possibility…

As LFJ reported at the end of February, Arizona’s legislature appears set on moving forward with some form of enhanced regulation for litigation funding in the state. However, a recent…

As funders and law firms await the outcome of the Civil Justice Council’s (CJC) review of litigation funding later this summer, industry experts are opining not only on the potential…

As LFJ has reported over recent weeks, the push for new rules governing litigation funding across several U.S. states has gained traction in 2025, with Georgia now set to impose…

If previous years saw an increase in the amount of discussion and debate around the regulation of litigation funding in the United States, then 2025 has already proven to be…

The High Court’s ruling in Angel & Ors v Black Horse Ltd earlier this month, which permitted the motor finance claims to proceed on a single claim form, not only…