On June 22, 2026, North Carolina became the first state in the country to ban third-party litigation funding outright. One sentence, a $50,000-per-violation penalty, a 45-to-1 Senate vote, and a personal-jurisdiction hook written into the statute itself.
On June 22, 2026, at 3:26 in the afternoon, Gov. Josh Stein signed his name to a law no governor in America had ever signed. He approved House Bill 315 as Session Law 2026-14. One sentence inside it ends an entire industry within North Carolina's borders. "It is unlawful for a person to engage in litigation investment in this State or to furnish litigation investment to a party or counsel of record in a civil proceeding in this State." That sentence is now Section 66-513 of the General Statutes. The number that gives it teeth is fifty thousand dollars.
North Carolina did not disclose. It did not cap. It banned. It is the first state in the country to outlaw third-party litigation funding outright. Every other state that has moved on funders reached for a lighter tool. Some have only regulated the terms of consumer advances. Other legislatures want the funder's name in the file. North Carolina took the whole table.
The law is short and it is hard. It adds a new Article 52 to Chapter 66. A funding contract that violates it is void. The North Carolina Attorney General may sue to enjoin a violation, and a court may stack a civil penalty of up to fifty thousand dollars on each one. A party hurt by a banned deal may sue for treble the full amount the investor ever stood to take. The statute orders judges to read it liberally. There is no soft edge here.
The vote shows how alone the funders stood. The Senate passed it 45 to 1, and the House concurred 112 to 0. The primary sponsors were Representatives Pyrtle, Miller, Carson Smith, and Reives. Stein, a Democrat, signed a bill the Republican majority wrote. The funders lost both parties at once.
The carve-out map shows who the law is aimed at. A lawyer may still work on contingency. A firm may still advance its own costs. An insurer's duty to defend a party is safe. A nonprofit may still fund its own suit. A family member may still pay a relative's court fees. None of that is litigation investment under the act. What dies is the outside money that buys a slice of a stranger's verdict. The bet on someone else's lawsuit. That is the target, and the act says so by leaving everything else alone.
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Now the fight moves to a courtroom, and the law was built for that fight. Section 66-514(d) is where it shows its hand. It declares that any person who furnished litigation investment to a party in North Carolina "has purposefully availed itself of the privileges of conducting business in this State" and is subject to suit here. The legislature wrote the personal-jurisdiction hook into the ban itself. A funder in London or New York that touched a single North Carolina case is now, by statute, haled into a North Carolina court. The drafters did not wait to be challenged. They set the trap and named the venue.
So the funders have to choose. They can stay out of the state and surrender it. Or they can sue to kill the law, and the theories are already visible. The first is the Contracts Clause. But the act reaches only contracts entered, renewed, or amended on or after the day it became law, which strips the easy claim that it tore up deals already signed. The second is the dormant Commerce Clause, the argument that North Carolina cannot wall off a national capital market at its border. The third is due process. Each one is a real case. None of them is a sure win. A funder with billions deployed has to decide whether to spend its own money proving a court wrong about its own business model.
The scoreboard is moving now, because North Carolina did not act in a vacuum. Disclosure bills sit in statehouse after statehouse. Federal proposals would force a funder's name onto the docket. North Carolina jumped the whole line and proved a legislature can go from disclosure to prohibition in a single session. The industry that spent a decade arguing it was harmless just lost a state, by 45 to 1 in the Senate and 112 to 0 in the House. Every other capitol watched it happen.
The carve-outs hold the line at family, nonprofits, and the duty to defend. The ban holds the line everywhere else. Section 1 reaches every civil proceeding filed on or after June 22 and every funding contract signed, renewed, or touched on or after that day. The clock started the moment Stein capped his pen. There is no grace period. There is no phase-in.
A governor signed one page. A whole market lost a state. Now they sue, or they stay out.
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