Private equity investment in litigation funding has become a lightning rod for media attention. Outlets like The Wall Street Journal have raised alarm bells, suggesting that profit-driven financiers may compromise the integrity of legal proceedings. Critics argue that financial returns are being prioritized over justice. But too often, these conversations miss a crucial distinction—not all litigation funding is the same, and not all private equity involvement is bad.

In fact, private equity has helped scale countless industries—including specialty finance—by fueling competition, job creation, and innovation. Entire groups of credit and PE funds routinely invest in businesses that bring greater efficiency to complex markets, and litigation finance should not be any different. The question isn’t whether investment should exist—it’s who gets to participate.

Why should insurance companies and commercial banks be allowed to participate while private equity is excluded for taking risk on the other side of the street?

Litigation funding is a risk-adjusted investment strategy. It doesn’t expand the pool of profits—it simply shifts who earns them. As more sophisticated investors enter the space, the market becomes faster, fairer, and more transparent. That means quicker claims resolution, improved access to care, and a more efficient path to justice for the people who need it most.

But not all litigation finance operates at the same level. There are two fundamentally different branches: commercial litigation funding, which typically supports high-stakes corporate disputes and already attracts private equity investment—and consumer legal funding, which exists to help injured individuals cover basic expenses while they await the outcome of a lawsuit. Both can involve private capital—a practice that was permissible in Georgia until the passage of Senate Bill 69—and both bring value to the system in different ways.

That’s the nature of functioning markets. The more participants on both sides of a transaction, the more efficient the market becomes. Private equity and hedge funds specialize in maximizing returns and reducing risk—and when they enter a market like legal funding, their presence creates efficiencies over time. But lumping all forms of litigation finance together, especially in legislation, does more than confuse the issue. It threatens to dismantle a vital financial lifeline for working-class plaintiffs in the name of regulating a separate sector already well understood by institutional investors.

Understanding the Capital Behind the Cases

Let’s be clear: consumer legal funding needs capital. Just like any other financial service, it relies on structured finance to remain viable and scalable. Institutional investment—which already includes private equity, credit funds, and commercial banks (some of which are foreign owned[BM1] )—enables funders to serve more people, spread risk, and stabilize rates. The more competition there is, the better off the market is. Returns ultimately come down when there is increased competition, which is a good thing. Without it, the system contracts, leaving plaintiffs without options during the most vulnerable periods of their lives.

This is where legislative overreach becomes a real concern. Georgia’s Senate Bill 69, for example, includes restrictions on foreign capital, caps on funder recovery, and vague prohibitions on “influence” over legal outcomes. These provisions may be aimed at commercial litigation finance, where concerns over foreign access to intellectual property may warrant closer scrutiny, but when applied to consumer legal funding—where capital from foreign banks supports non-recourse advances to individuals with no exposure to sensitive information—the rationale doesn’t quite add up. A regulation designed to monitor hedge fund-backed patent wars ends up choking off lifelines for car crash victims who can’t pay rent.

Far from safeguarding national security, this measure amounts to a blatant misuse of legislative power.

Capital Isn’t the Problem—Clarity Is

Institutional investment, including private equity, credit funds, and commercial banks, is not inherently problematic in legal finance. It’s no different than institutional investment in healthcare, housing, or insurance. And while some critics worry about financiers chasing profit, they forget that consumer legal funding is non-recourse. That means plaintiffs only repay if they win their case—otherwise, the funder bears the loss.

The real issue is that bills like Senate Bill 69 lump consumer and commercial litigation funding together, without understanding their vastly different mechanics, intentions, or impacts. Consumer legal funding:

• Involves small advances—typically around $2,000
• Plays no role in legal strategy (contractually prohibited)
• Exists solely to help injured individuals survive while their cases unfold

At Gain, we originate and purchase portfolios of small legal funding claims as part of a structured finance approach—similar to how other industries securitize loans or receivables. This model allows us to diversify risk and create liquidity, rather than tying up capital in individual advances held on our balance sheet.

Senate Bill 69 threatens this structure by limiting our ability to assign or securitize funding agreements—except in narrow cases, such as when transfers are made to wholly owned subsidiaries, affiliates under common control, or in connection with standard security interests. These carveouts are too limited to support a scalable model.

By restricting how funding contracts can be transferred or bundled, the bill undermines a core financial mechanism that enables providers like us to serve more plaintiffs, more sustainably.

Final Thoughts

Without access to structured capital—private equity, hedge funds, credit funds, and in some cases commercial banks—consumer legal funding becomes unsustainable. And when that happens, plaintiffs aren’t safer; they’re stuck. They’re forced to settle early for less, fall behind on rent, or turn to options like borrowing from friends and family, depleting savings, and using high-interest credit cards. In some cases, a low-rate credit card might be a reasonable short-term solution—but when rates climb higher than a non-recourse advance, the risk to the borrower increases dramatically.

And that’s the difference: consumer legal funding is designed to protect plaintiffs, not burden them. It provides more than just financial support—it provides choice. And choice is freedom: the freedom to stay in the fight, to avoid desperation, and to pursue justice on your own terms.

There’s a time and place for regulation. Transparency and ethical boundaries should absolutely be enforced. But policymakers must stop legislating as though all litigation funding is the same. Consumer legal funding isn’t commercial litigation funding. One exists to fund corporate legal battles; the other exists to help everyday people survive.

Private equity isn’t what’s standing in the way of justice—it’s often what makes justice possible.

The real question isn’t whether capital belongs in litigation finance. It’s whether we have the clarity—and the courage—to build systems that serve the people who need them most.