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By: Edgar Santiago, Poyner Spruill

On Monday, June 22nd, North Carolina Governor Josh Stein signed House Bill 315 (Session Law 2026-14) into law, making North Carolina the first state in the nation to prohibit most forms of third-party litigation funding. Third-party litigation funding has become a multibillion-dollar industry in recent years, which has raised concerns about corporate interests' undue influence on both the litigation process and the court system as a whole.

Lawmakers passed this bill after raising concerns that outside funding can prolong litigation and increase costs. For parties involved in disputes, this is not just a legal development, but a shift in how litigation is financed, evaluated, and resolved.

What Is Changing

The law broadly bans arrangements where a third party, such as a private equity firm or hedge fund, provides funding for litigation in exchange for a return tied to the outcome of a case. The bill applies not just to litigation, but also to efforts to fund arbitration and administrative proceedings.

What methods of litigation funding are still permitted under the new law?

• Legal services performed on a contingency basis.
• An attorney or law firm's advancement of a party's costs and expenses in accordance with the North Carolina Rules of Professional Conduct.
• An insurer's contractual obligation to indemnify or defend a party in a civil proceeding.
• Nonprofit organizations fundi......................

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