Litigation finance has a long history and, in recent years, has established itself as a niche segment in the asset-backed securities (ABS) market. However, new legislation could significantly alter the economics of this evolving structured finance asset class. The Tackling Predatory Litigation Funding Act (TPLFA)—currently included in the U.S. Senate’s One Big Beautiful Bill Act (OBBBA)—proposes substantial new taxes on profits from third-party litigation funding. Litigation finance ABS transactions, which are typically backed by nonrecourse advances to plaintiffs in personal injury and other civil cases,1 could face meaningful structural and liquidity challenges if the legislation is enacted. In this report, KBRA examines the potential implications of the TPLFA for litigation finance ABS.
Summary of Possible TPLFA Implications
If enacted in its current form, the TPLFA provisions could have several implications for litigation finance ABS, including: