Fact-ed · North Carolina
North Carolina just banned litigation investment. Here is exactly what passed.
House Bill 315 became Session Law 2026-14 on June 22, 2026. It is the first outright state ban on litigation investment. Here is what it says, with citations, and nothing else.
July 15, 2026
- 112 to 0
- House vote
- 45 to 1
- Senate vote
- Jun 22, 2026
- Signed and effective
- 9
- Exclusions from the ban
What passed
On June 22, 2026, Governor Josh Stein signed House Bill 315 into law as Session Law 2026-14. The House had passed it 112 to 0. The Senate passed it 45 to 1. It creates a new Article 52 of Chapter 66 of the General Statutes, titled the Prohibit Litigation Investments Act, at N.C. Gen. Stat. §§ 66-511 through 66-515.
The Act took effect the moment it was signed. It applies to civil proceedings commenced on or after June 22, 2026, and to funding contracts entered into, renewed, or amended on or after that date.
What counts as litigation investment
The Act bans providing money, "whether as a direct payment, advancement, loan, investment, or otherwise," for the fees, costs, and expenses of or related to a pending or potential civil proceeding, in exchange for a right to repayment or other consideration that is contingent in any respect on the outcome. That is § 66-512(3). Section 66-513 makes it unlawful to engage in litigation investment in North Carolina or to furnish it to a party or counsel of record in a North Carolina civil proceeding.
Two elements do the work. The money must go to the costs of the case, and the repayment must ride on the result. Remove either element and the Act does not reach the transaction.
The nine exclusions
The Act lists nine things that are not litigation investment:
(a) Contingency fees. Contingency-fee legal services.
(b) Attorney cost advances. An attorney or law firm advancing costs under the Rules of Professional Conduct.
(c) Insurance. An insurer's duty to defend or indemnify.
(d) Nonprofit self-funding. A nonprofit funding its own or its members' cases, with repayment capped at the original amount plus reasonable interest.
(e) Pro bono. Nonprofit pro bono legal services on the same repayment cap.
(f) True loans. A direct loan to a party, firm, or attorney where repayment does not depend on the case.
(g) Personal and household expenses. Money or financial support given to a party for personal and household expenses during the case, so long as it is not used for the fees, costs, and expenses of the proceeding.
(h) No-stake cost support. Litigation-cost support where the provider takes no share of the recovery and no outcome-contingent right.
(i) Family. Money or support from an immediate family member, on any terms.
The household-expenses line
Exclusion (g) is the one that matters for consumer funding. It conditions on the use of the money, not on how repayment is structured. The text in full, from § 66-512(3)(g):
“The provision of money or other financial support to a party for personal and household expenses during the pendency of a civil proceeding so long as the money or financial support is not used for the fees, costs, and expenses of the civil proceeding.”
The statute does not say how that line will be policed for outcome-contingent consumer funding, and no North Carolina court has construed the Act yet. That is the open question practitioners are watching.
Penalties
The contract is void. A contract in violation of the Act is unenforceable.
Up to $50,000 per violation. The Attorney General may seek an injunction and civil penalties.
Treble damages. A person injured by a violation may sue and elect at judgment between common-law damages and statutory damages of treble the full potential litigation investment, plus court costs and reasonable attorneys' fees.
Section 66-514(d) is a special jurisdiction provision. A funder that furnishes litigation investment to a party or counsel of record in a North Carolina proceeding is subject to suit in North Carolina whether or not it transacts any other business in the state. Section 66-515 instructs courts to construe the Act liberally.
What happens to existing contracts
Contracts signed before June 22, 2026 in cases commenced before that date are outside the Act. Renewing or amending such a contract on or after June 22, 2026 brings it inside.
Also in the bill
Part II of the session law amends the Workers' Compensation Act, effective July 1, 2027 for claims arising on or after that date:
| Provision | Before | After |
|---|---|---|
| Minimum weekly compensation, total incapacity | $30 | $50 |
| Cap, serious facial or head disfigurement | $20,000 | $40,000 |
| Cap, other serious bodily disfigurement | $10,000 | $20,000, with a new employability connection requirement |
| Cap, loss of or permanent injury to an important organ | $20,000 | $40,000 |
Sources
- Session Law 2026-14 (House Bill 315), ratified text, North Carolina General Assembly (accessed July 15, 2026)
- House Bill 315 bill history, North Carolina General Assembly (accessed July 15, 2026)
- North Carolina Enacts First-in-the-Nation Ban on Third-Party Litigation Financing, Consumer Finance Monitor (Ballard Spahr) (accessed July 15, 2026)
- North Carolina Becomes First State to Pass Outright Ban on Litigation Financing, Insurance Journal (accessed July 15, 2026)
For educational purposes only, not legal advice. Laws change and courts reinterpret them. Check the dated sources on this page, and talk to a lawyer licensed in your state about your own case.
The record
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