The industry dodged a bullet, but the push for regulation is only gaining speed.
For now, litigation finance funders can exhale. A proposed tax on profits — initially 40.8%, later revised to 31.8% — has been stripped from the Senate’s sweeping tax and spending bill, dubbed the “One Big Beautiful Bill.”
The removal came courtesy of a Byrd Rule challenge: the Senate parliamentarian ruled that the provision didn’t belong in a reconciliation bill because of its negligible budget impact.
The latest iteration of the tax, proposed by Sen. Tom Tillis, was projected to raise just $1.5 billion over 10 years — spare change in a $3.8 trillion package.
Behind the Scenes
This result was not a lucky break, but rather a coordinated push. Funders, led by the International Legal Finance Association (ILFA), mounted a fierce lobbying effort that included outreach to lawmakers, industry allies and law firms.
The message was that the tax wasn’t about fairness, but was intended as a kill shot aimed at an emerging financial sector that supports access to justice and market efficiency.
And it worked. For now.
The Bigger Picture: Regulation Is Not Going Away
Even with this win, the landscape is changing. Calls for greater disclosure, transparency and even taxation are growing louder. We should anticipate more at both the state and federal levels.
This latest episode is part of a broader trend: litigation finance is now squarely in the regulatory crosshairs.
Earlier federal efforts, like Sen. Chuck Grassley’s failed Litigation Funding Transparency Act of 2021, have already inspired state-level action. Other bills are pending that would require disclosure of all third-party funding.
The Chamber of Commerce, large insurers and multinationals are throwing serious weight behind regulatory efforts.
Why It Matters: Investors Need to Stay Engaged
The litigation finance sector is maturing, and with that comes increased scrutiny. The Tillis tax proposal may have been defeated this round, but the idea of imposing restrictions on litigation finance is now in play.
Funders, investors, and their legal partners should remain on high alert. Track developments in both state and federal legislatures. Join industry coalitions. With this defeat in the Senate, there will be renewed emphasis on the states.
See our state-by-state map of the Current Regulatory Landscape.
Bottom Line
Self-regulation is no longer enough. Litigation finance has entered a new phase — one where political strategy and policy engagement are essential to survival. The industry has shown it can mobilize. Now it must stay engaged.
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