We rarely feel compelled to speak out against legislation, but Senator Thom Tillis’s S.1821—misleadingly titled the “Tackling Predatory Litigation Funding Act”—isn’t just bad policy. It’s a direct assault on free enterprise, property rights, and the civil justice system that safeguards accountability in America.
• It doesn’t “tackle predators.”
• It doesn’t “protect plaintiffs.”
• It does one thing: it attempts to shut down third-party capital that helps level the playing field against entrenched large corporates.
A 40.8% Tax? On Capital Gains?
Senator Tillis wants to reclassify returns from litigation funding as ordinary income, rather than capital gains—triggering a 40.8% tax (37% top income rate plus 3.8% net investment income tax). For an asset class that is already high-risk and long-duration.
This isn’t tax reform. It’s targeted financial punishment disguised as consumer protection. The proposal isn’t about fairness; it’s designed to deter investment in meritorious claims brought by accident victims, small businesses, inventors, and whistleblowers. While litigation funders are the immediate target, the broader effect is to isolate plaintiffs who lack the resources to challenge powerful defendants—effectively denying them access to justice.
Conservatives Should Be Outraged
This bill:
• Distorts market forces by making it economically nonviable to fund litigation unless you’re a billion-dollar firm with an internal war chest.
• Empowers monopolies and institutional bad actors by depriving plaintiffs of equal access to justice.
• Invites foreign influence by driving capital offshore, while pretending to fight it.
• Forces premature settlements simply because plaintiffs can’t afford to go the distance.
• Shields insurance companies from accountability by disabling one of the only tools ordinary people and businesses have to push back—funded litigation.
And all in the name of “protecting consumers”?
The Real Agenda: Shielding the Powerful
Let’s be honest: this bill has nothing to do with fairness, fiscal discipline, or protecting consumers. It’s about shielding powerful defendants—polluters, infringers, monopolists—from accountability. It gives them a legal playing field rigged in their favor, where only they can afford to fight.
Senator Tillis, respectfully:
You don’t protect the rule of law by taxing access to it out of existence.
Impact on SIM IP—and the Broader Market; What’s Next?
Our opposition to this bill serves our competitors’ interests more than our own. SIM IP primarily acquires intellectual property and enforces it using internal capital. As a result, the direct impact on our business will be negligible, as we reallocate from traditional litigation funding toward IP acquisition-based monetization, credit-based financing, and royalty strategies.
In fact, if this bill becomes law, SIM IP may stand to benefit. Given our reputation and track record in IP monetization, we would be among the few players positioned to operate effectively—and tax-efficiently—under this new regime. But that outcome does not align with our principles. It does not serve the interests of justice, market fairness, or innovation. Our focus remains strictly on IP, not capital suppression masquerading as reform.
The broader market impact, however, is alarming. This bill sends a chilling message across the investment community—private equity, venture capital, credit, hedge funds: you could be next. Today it’s litigation funding. Tomorrow it’s “Predatory Acquisitions and Investments” and goodbye “carried interest.”
Where does it stop?
The disruption caused by this legislation will have long-term consequences. By introducing selective taxation aimed at disfavoring specific financial strategies, the bill creates a new layer of political risk that investors must now factor into their cost of capital. Over time, this will reduce the availability of funding for everyone , not just plaintiffs, given the misaligned incentives. Why support a startup whose IP was stolen, an accident victim, a breach of contract claim—if they can’t seek justice? It’s economic suppression.
Insurers themselves have warned that this bill could lead to smaller settlements. But let’s be clear: the real-world effect will be the opposite. Settlements will be “grossed up” to account for higher costs and fewer funding options—making justice harder to access and more expensive for everyone involved. In the alternate universe of an insurer—if most litigation goes away—what’s the need for insurance? We posit insurers are attempting to regulate themselves out of existence or at least downsize dramatically at the behest of large corporates. Clueless, right? We think so.
Kill This Bill
We call on business leaders, legal professionals, and defenders of free markets to reject this dangerous overreach. S.1821 is the wrong bill, at the wrong time, for all the wrong reasons.
If you believe in markets, fairness, and access to justice, you must oppose the Tackling Predatory Litigation Funding Act.
Erich Spangenberg and David Kutcher
SIM IP
