WASHINGTON, D.C. – The Consumer Choice Center is encouraged by recent efforts in Congress to place limits on what’s known as Third-Party Litigation Funding, a booming and largely unregulated industry that distorts the American justice system and drives up costs for consumers.
The Tackling Predatory Litigation Funding Act, introduced by Senator Thom Tillis (R-NC) and mirroring House legislation by Rep. Kevin Hern (R-OK), seeks to add transparency and tax fairness to the $13.5 billion litigation finance industry by treating third-party lawsuit proceeds as ordinary income and requiring disclosure of outside financial interests. It has made its way into President Trump’s “One Big Beautiful Bill“.
“This is a common-sense step toward restoring integrity to the U.S. legal system,” said Yaël Ossowski, deputy director of the Consumer Choice Center. “Outside investors and foreign firms with political agendas are using U.S. courts to essentially gamble on litigation for big returns and also hamstring American companies. Some of it is purely financial motive, and in other cases, it’s ideological, or even geopolitical.”
The bill would end the favorable tax treatment for litigation investors by treating their cut of settlements not as capital gains, but as ordinary income taxed at the highest rate. It also encourages greater transparency about who is bankrolling major legal cases.
“Litigation funding isn’t inherently wrong, but when it becomes a backdoor tool for political activism or intellectual property sabotage, consumers pay the price in the form of higher energy costs, slower innovation, and clogged courts,” added Ossowski.
Major investors, including the Soros Economic Development Fund, have poured capital into litigation finance firms that support lawsuits advancing ESG and environmental agendas. Others, such as the Australia-based Intergenerational Environmental Justice Fund, have funded dozens of climate lawsuits that threaten energy affordability.
“Even if it were well-intentioned, the flood of foreign capital into targeted lawsuits is distorting legal outcomes and undermining trust in American courts,” said Ossowski. “Justice should be blind, not manipulated by the highest bidder.”
The Consumer Choice Center has previously warned about the growing influence of opaque legal financing in outlets such as The National Interest, Townhall, Legal Newsline, and on YouTube.
“The Tillis bill won’t eliminate litigation funding, nor should it,” concluded Ossowski. “But it does provide the guardrails we need to ensure our courts remain a forum for fairness, not a playground for hedge funds and activist investors.”
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The Consumer Choice Center is an independent, non-partisan consumer advocacy group that champions the benefits of freedom of choice, innovation, and abundance in everyday life for consumers in over 100 countries. We closely monitor regulatory trends in Washington, Brussels, Ottawa, Brasilia, London, and Geneva. Find out more at www.consumerchoicecenter.org
