The following Chamber Update is from NC Chamber Deputy General Counsel Rebekah Wilson and breaks down North Carolina’s first-in-the-nation ban on third-party litigation investment, what the new law does, why it matters for employers, and what businesses should consider moving forward.

North Carolina has once again demonstrated its commitment to maintaining one of the nation’s strongest environments for business growth and economic vitality. On June 22, 2026, Governor Josh Stein signed House Bill 315, the Prohibit Litigation Investments Act, into law, making North Carolina the first state in the nation to prohibit third-party litigation investment (TPLI). The legislation received overwhelming bipartisan support in the General Assembly and reflects a growing recognition among policymakers, employers, and legal experts that the civil justice system should serve as a forum for resolving disputes, not as an investment marketplace.

For the business community, House Bill 315 represents a significant development in North Carolina’s legal climate and reinforces the state’s longstanding commitment to fairness, transparency, and economic competitiveness.

What Is Third-Party Litigation Investment?

Third-party litigation investment, sometimes referred to as litigation financing, occurs when an outside investor provides financing for a lawsuit in exchange for an equity stake in the outcome of the case. The TPLI industry has grown into a multi-billion-dollar market, with an estimated $15.2 billion in assets under management in the United States alone.

TPLI raises serious concerns for businesses and the civil justice system. Critics have warned that TPLI:

• Introduces financial incentives that prolong litigation and drive up settlement costs
• Damages the attorney-client relationship by allowing outside investors to influence legal strategy
• Encourages the filing of non-meritorious claims to generate investor returns
• Enables foreign adversaries, including investors linked to China, Russia, and others, to fund litigation against U.S. companies and gain access to sensitive proprietary information through the discovery process
• Operates with little to no transparency, making it difficult for courts and parties to identify conflicts of interest.

What House Bill 315 Does

The new law broadly prohibits any arrangement in which a third party provides money for the fees, costs, or expenses of a civil proceeding in exchange for any return that is contingent on the outcome of that proceeding. The ban extends to civil actions, arbitration, mediation, and administrative proceedings.

Importantly, the legislation does not affect traditional and widely accepted methods of financing legal representation. The following arrangements remain permissible:

• Attorney contingency fee arrangements under the NC Rules of Professional Conduct;
• An attorney or law firm’s advancement of litigation costs;
• Insurance defense and indemnification obligations;
• Non-contingent direct loans to a party, attorney, or law firm;
• Nonprofit legal services;
• Nonprofit organizations funding litigation on behalf of themselves or their members;
• Financial support for personal or household expenses during litigation;
• Financial assistance provided without a right to share in a judgment or settlement; and
• Financial support from immediate family members.

In short, House Bill 315 targets investment-driven litigation financing while preserving legitimate and longstanding methods of obtaining legal representation and funding litigation expenses.

Enforcement and Penalties

The new law provides meaningful enforcement mechanisms. Any contract in violation of the statute is void. The North Carolina Attorney General is authorized to seek injunctions and civil penalties of up to $50,000 per violation. Additionally, individuals injured by an unlawful litigation investment arrangement may pursue damages and recover attorneys’ fees and costs, with the option to seek statutory damages equal to three times the amount of the contemplated investment. The law applies to civil proceedings commenced on or after June 22, 2026, and to contracts entered into, renewed, or amended on or after that date.

What This Means for Your Business

The ban fundamentally shifts the economics of litigation in North Carolina. Without access to outside investment capital, litigants on both sides will increasingly rely on internal budgets, insurance, or traditional fee arrangements to fund disputes. This is likely to produce several practical effects:

• Earlier settlement pressure. As costs become a more immediate strategic consideration, parties may move toward resolution sooner.
• More predictable outcomes. Removing outside financial interests may reduce prolonged, investment-driven litigation.
• Stronger IP and data protections. Banning foreign-backed litigation funding reduces the risk of adversaries using the courts to access confidential business information through discovery.
• Revised litigation budgets. Businesses should revisit how they allocate legal resources and reconsider their criteria for initiating or defending litigation.

For North Carolina businesses, the legislation represents a noteworthy effort to address concerns that third-party investors may encourage speculative litigation, prolong disputes, and increase settlement pressures by introducing financial interests that are independent of the parties involved in the case.

Key Takeaways for Businesses

Businesses operating in North Carolina and actively involved in litigation within the state should:

• Review existing litigation matters for any third-party funding arrangements (both in your own cases and those of adverse parties)
• Consider litigation budgets and internal standards for pursuing litigation given the new restrictions; and
• Consult with legal teams to assess how changes in litigation economics may affect ongoing strategy and risk tolerance.

By becoming the first state to prohibit third-party litigation investment, North Carolina has taken a leadership position in a national debate that continues to evolve. While several states have adopted disclosure requirements and regulatory frameworks governing litigation finance, North Carolina chose a more comprehensive approach designed to prevent the practice from becoming entrenched within its legal system.

The legislation reinforces a principle that resonates strongly with employers across the state: disputes should be resolved by the parties and their counsel, not by outside investors seeking financial returns.