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Navigating a changing landscape

The lawsuit funding industry has seen a wave of new regulations entering 2026. From the New York Consumer Litigation Funding Act to Georgia’s SB 69, state legislatures are increasingly prioritizing transparency and consumer protection. For plaintiffs and attorneys, understanding these shifts is critical.

At Baker Street Funding, we operate with a “Transparency-First” model, so our non-recourse advances meet or exceed the strictest state-level compliance standards.

2026 legal funding compliance.

State-by-State Lawsuit Loan Regulations in the Northeast Region.

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State	Regulated?	Funding Available	# of Partner Attorneys	Bar Association
Connecticut	No	Yes	12	Connecticut Bar Association
Maine	Yes – See State Regulation	Yes	N/A	Maine State Bar Association
Massachusetts	No	Yes	17	Massachusetts Bar Association
New Hampshire	Yes	Yes	15	New Hampshire Bar Association
New Jersey	No	Yes	10	New Jersey State Bar Association
New York	Yes – See Regulation	Yes, up to $500k	N/A	New York State Bar Association
Pennsylvania	No	Yes	9	Pennsylvania Bar Association
Rhode Island	No	Yes	7	Rhode Island Bar Association
Vermont	Yes – See Regulation	Yes	N/A	Vermont Bar Association

State-by-State Lawsuit Loan Regulations in the Southeast Region

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State	Regulated?	Funding Available	# of Partner Attorneys	Bar Association
Alabama	No	Yes	20	Alabama State Bar
Florida	No	Yes	25	The Florida Bar
Georgia	Yes – See Regulation	Yes	18	State Bar of Georgia
Kentucky	Yes – See Regulation	No. State legal restrictions for plaintiffs in place.	N/A	N/A
Mississippi	No	Yes	10	The Mississippi Bar
North Carolina	Yes – See Regulation	Limited. Minimum $25K due to state cost limits.	N/A	North Carolina Bar Association
South Carolina	Yes – See Law	Yes	N/A	South Carolina Bar
Tennessee	Yes – See Law	Yes	N/A	Tennessee Bar Association
Virginia	No	Yes	15	Virginia State Bar
West Virginia	Yes – See Regulation	No. State interest rate restrictions limit funding.	N/A	N/A

State-by-State Lawsuit Loan Regulations in the Midwest Region

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State	Regulated?	Funding Available	# of Partner Attorneys	Bar Association
Illinois	Yes – See Regulation	Yes. Max funding limited to $40K by state law.	N/A	Illinois State Bar Association
Indiana	Yes – See Regulation	Yes. Minimum $10K per state law.	N/A	Indiana State Bar Association
Iowa	No	Yes	12	Iowa State Bar Association
Kansas	Yes – See Law (From 1956)	No. State laws prohibit funding.	N/A	N/A
Michigan	No	Yes	20	State Bar of Michigan
Minnesota	No	Yes	16	Minnesota State Bar Association
Missouri	Yes – See State Regulation	Yes	N/A	The Missouri Bar
Nebraska	Yes – See Regulation	Yes	N/A	Nebraska State Bar Association
North Dakota	No	Yes	8	State Bar Association of North Dakota
Ohio	Yes – See State Regulation	Yes	N/A	Ohio State Bar Association
South Dakota	No	Yes	N/A	State Bar of South Dakota
Wisconsin	No	Yes	11	State Bar of Wisconsin

State-by-State Lawsuit Funding Regulations in the Southwest Region

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State	Regulated?	Funding Available	# of Partner Attorneys	Bar Association
Arizona	No	Yes	16	State Bar of Arizona
Arkansas	Yes – AR Code § 4‑57‑109	No. State laws limit interest rates.	N/A	Arkansas Bar Association
Louisiana	Yes – See Regulation	Yes	18	Louisiana State Bar Association
New Mexico	No	Yes	11	State Bar of New Mexico
Oklahoma	Yes – See Regulation	Yes	N/A	Oklahoma Bar Association
Texas	No	Yes	25	State Bar of Texas

State-by-State Lawsuit Funding Regulations in the West Region

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State	Regulated?	Funding Available	# of Partner Attorneys	Bar Association
Alaska	No	Yes	7	Alaska Bar Association
California	No	Yes	30	State Bar of California
Colorado	Yes – See Law	Limited to a min of $75K. State law interest limits restrict funding.	N/A	Colorado Bar Association
Hawaii	No	Yes	8	Hawaii State Bar Association
Idaho	No	Yes	10	Idaho State Bar
Montana	No – See Law	No. Strict state regulations impose limits on funding.	N/A	State Bar of Montana
Nevada	Yes – See Plaintiff-Friendly Law	Yes	15	State Bar of Nevada
Oregon	No	Yes	12	Oregon State Bar
Utah	No	Yes	5	Utah State Bar
Washington	No	Yes	20	Washington State Bar Association
Wyoming	No	Yes	9	Wyoming State Bar

Key 2026 regulatory trends to watch

To help you understand the “Why” behind the table, here are the three biggest trends shaping legal funding this year:

Mandatory Disclosure Laws

Several states now require plaintiffs to disclose the existence of a funding agreement to the defense during discovery. This is intended to prevent “over-litigation,” though our contracts are drafted to protect your attorney-client privilege.

Non-Recourse vs. Usury Laws

A major regulatory battle in 2026 involves whether lawsuit funding should be classified as a “loan.” In states like Ohio and Texas, courts have consistently ruled that because the funding is non-recourse (you don’t pay if you lose), it is a purchase of an asset, not a loan subject to usury interest caps.

Fee Caps and “Fair Share” Rules

New York led the way in 2026 by implementing caps to ensure that the plaintiff always walks away with the majority of their settlement. We support these measures, as they align with our 3-year rate cap policy.

Non-Recourse vs. Traditional Loans

Why the distinction matters for your settlement.

In 2026, a major legal battle is happening in state legislatures: Should lawsuit funding be called a “loan”?

Insurance companies are lobbying to classify funding as a “loan” so it falls under usury laws. If it’s a loan, they can often force you to disclose the agreement in court, using it as leverage to argue you are “over-funded” and shouldn’t receive a high settlement.

At Baker Street Funding, our advances are non-recourse. Legally, this is the purchase of a portion of your future settlement—not a loan.

If you lose: You owe $0$. A “loan” would require repayment regardless of the outcome.

The benefit? Because it isn’t a loan, it does not impact your credit score, and in most states (like Texas and Oregon), it remains a private financial transaction.

Use a small “VS” graphic here. Loan (Repayment Mandatory + Credit Check) vs. Non-Recourse Advance (Repayment Contingent + No Credit Check).

Warning: Why insurance companies want “loan” reclassification

You may notice some states trying to reclassify “non-recourse funding” as a traditional “loan.” Why? If it’s a loan, insurance defense teams can often:

Force you to disclose exactly how much money you’ve received.
Argue that you are “over-funded” and less likely to settle fairly.
Use it as leverage to low-ball your final offer.

Our Stance: Baker Street Funding maintains a strict non-recourse model to keep the leverage in your hands.

Countering insurance defense tactics.

How we protect your leverage.

As noted, insurance companies use “The Delay Game” to wait for your bank account to hit zero. They know that a desperate plaintiff accepts 30-40% less than a case is worth.

How we neutralize their strategy:

Eliminating Desperation: By covering your rent and medical bills now, we remove the “ticking clock” that insurance adjusters rely on.
Trial-Ready Stability: When the defense sees you have funding, they realize you have the financial “staying power” to go to trial rather than taking a low-ball settlement.
Privacy Protection: We draft our agreements to maximize protection under the Work-Product Doctrine, making it harder for insurance lawyers to poke around in your financial business.

Learn more about how insurance companies use ‘The Delay Game’ and how to counter it in our [Settlement Advocate Guide].

Baker Street Funding’s stance on 2026 pending legislation.

While we applaud state’s move toward higher ethical standards, we believe some states have current bills that misse the mark on true consumer protection.

What We Support (Integrity)	What We Oppose (Market Distortions)
✅ Foreign-Funder Disclosure: Protecting national security and preventing adversary influence.	❌ No Hard Price Caps: The bill allows 49% splits; we believe a 25% cap on gross recovery (like NY) is the only true way to protect plaintiffs.
✅ No Funder Control: Ensuring attorneys and plaintiffs retain 100% of the legal strategy.	❌ The Broad Broker Ban: Banning legitimate intermediaries reduces competition, leaving plaintiffs with fewer choices and higher rates.
✅ Banning Attorney Kickbacks: Eliminating “pay-to-play” schemes between lawyers and funders.	❌ Compounding Interest Structures: We advocate for simple interest and clear total-cost disclosures over “endless” compounding debt.

Disclaimer: This content is for informational purposes only and does not constitute legal advice. Pre-settlement funding is non-recourse and is repaid only from the proceeds of a successful settlement or verdict. Terms vary by case and are subject to attorney review and applicable state rules.

The Federal perspective: competition & antitrust.

Any “lawsuit funding regulation”, such as the Florida “Litigation Investment Safeguards and Transparency Act”, designed to eliminate “commercial intermediaries” (brokers) doesn’t only hurt plaintiffs—it potentially runs afoul of federal competition principles.

The Sherman Act & Fair Markets: Federal law is designed to prevent “restraint of trade.” When a state bill bans an entire class of professional intermediaries (brokers), it creates a bottleneck. This reduces the number of funders a plaintiff can reach, effectively “fixing” the market in favor of a few large, well-capitalized firms.
The FTC View (2026): Current federal guidelines emphasize that consumer choice is the ultimate metric of a healthy market. By removing brokers—who act as the “market-makers” for plaintiffs—legislators are inadvertently restricting that choice.

Our Stance: Baker Street Funding maintains a strict non-recourse model to keep the leverage in your hands.

Your 2026 rights as a plaintiff.

Under the newest 2026 regulatory framework, you have the right to:

Total Transparency: To see every fee and the total payoff amount before signing.
Strategic Independence: Your funder cannot tell your lawyer how to handle your case.
Fair Treatment: To have your funding agreement treated as a private financial matter, not a tool for insurance adjusters.

Frequently Asked Questions (FAQ)

Is lawsuit funding legal in my state?

Lawsuit funding is legal in the vast majority of U.S. states. However, some states (like Arkansas or West Virginia) have specific restrictions that has pushed away most (if not all) legal funding companies from providing services to plaintiffs on need in those states.

Do these regulations affect my attorney's fees?

No. Regulations typically focus on the relationship between the funder and the plaintiff. Your agreement with your law firm remains a separate contingency-fee contract.

How does Baker Street Funding stay compliant?

We monitor legislative changes in real-time. Our contracts are localized to meet the specific statutes of the state where your case is filed.

Check out our lawsuit loan articles.

If you are seeking to understand your funding options during a personal injury case, our resources provide some important insights to help you make the most informed financial decision.