The Ban That Wasn’t: Ohio’s New Litigation-Funding Law

Ohio Governor Mike DeWine signed HB 105 in early July, and the coverage called it a foreign-funder ban, the second state to restrict litigation finance this summer after North Carolina’s outright prohibition. The bill text tells a stranger, more useful story: a real but narrow capital restriction bolted onto a disclosure regime, and it only looks like North Carolina’s ban from a headline’s distance.

I have real money riding on the answer to “is this a ban.” I hold commitments to commercial litigation finance funds — the funds are my only door into this asset class now that retail single-case investing has effectively closed. So when North Carolina banned litigation funding outright in June, I read it as a live underwriting question, not a policy curiosity. Two weeks later, Ohio signed its own bill, and the coverage lumped the two together. They shouldn’t be lumped together — the statute says something narrower and more specific than the headlines did.

The Headline vs. the Statute

Governor DeWine signed House Bill 105 on July 7, 2026. ABA Journal, citing a Law360 report, framed it plainly: “Ohio governor signs bill prohibiting foreign litigation funding.” The piece named two funders as affected — Burford Capital and Parabellum Capital — “because they’re headquartered abroad or have investors who are,” and noted the bill also requires funders to register and disclose agreements to the state attorney general.

That framing — a foreign-funder ban, Ohio joining North Carolina as the second state to restrict litigation funding this summer — is close enough to pass at a glance, which is exactly the problem. Read against the statute, both halves of that sentence turn out to be imprecise.

Statute	HB 105 (Ohio Rev. Code Ch. 1357)
Signed	July 7, 2026, by Gov. Mike DeWine
Model	Registration + disclosure for all funders, plus a narrow ban on foreign-capital-tied deals
Sponsor framing	“The business of nonrecourse litigation funding has operated without guidelines for too long” — Rep. Meredith Craig (R)
Enforcement	Ohio Attorney General; can bar a violating financier from doing business in the state

What HB 105 Actually Does

The bill is really three separate pieces stapled together, and only one of them is a ban:

Provision	What it does
§1357.06 — the foreign-capital ban	No commercial or consumer funder may enter an agreement respecting a claim financed, directly or indirectly, by anyone “not domiciled in the United States”
§1357.07(B) — the conduct rule	Bars any funder, foreign or domestic, from influencing case strategy or settlement decisions
Registration + AG disclosure	All commercial and consumer funders must register with the state and disclose funding agreements to the Attorney General after the case resolves

Read that table again and notice what’s missing: nothing here says a fund with domestic capital can’t finance a case in Ohio. That funding stays legal — registered, disclosed after the fact, and barred from steering the litigation, but legal. “Ohio bans litigation funding” describes one of three provisions. The other two describe a disclosure regime that’s closer in spirit to what Kansas and Michigan passed this year than to what North Carolina did.

The Part That’s Actually a Ban — and Why It’s Stranger Than It Sounds

Section 1357.06’s trigger is the interesting part, and it’s worth being precise about it, because it’s easy to describe sloppily. The test is always the same question: where did the capital financing this specific claim come from, directly or indirectly? It is never simply “is the funder’s own office abroad.” Those two questions just happen to collapse into the same answer for a funder that finances cases directly off its own balance sheet — because in that case, the funder is the capital source, so its own domicile and the capital’s domicile are identical facts.

That’s why Burford is caught: it finances much of its business directly off its own balance sheet, and Burford Capital Limited is domiciled in Guernsey, not the US — so when it self-funds, the funder’s domicile and the capital’s domicile are the same fact, and no look-through is even required. (Burford also runs a sovereign-wealth-fund vehicle and several private funds with real third-party LPs, so a good chunk of its book would get caught the fund-manager way too — but the balance sheet alone is enough.) A pure fund manager doesn’t have that first option: the entity signing the agreement (often a US-domiciled LP or LLC) is just a vehicle for outside capital, so its own domicile tells you nothing, and the statute’s only way in is to look through to that fund’s own investor base — its limited partners.

One more distinction is worth flagging, because it changes who actually has to care about the compliance date: §1357.06 is written as a restriction on entering into an agreement, not a provision that voids agreements already in place. That’s a real difference from North Carolina’s HB 315, where “voids any contract in violation” left open whether pre-existing agreements on in-flight cases could be swept in retroactively — an unresolved question the industry expects to get litigated. Ohio’s language doesn’t carry that ambiguity: it governs new agreements signed on or after the effective date, and there’s no companion provision reaching backward to unwind funding relationships already in place. A fund with a legacy book that isn’t signing anything new in Ohio isn’t touched by this section, regardless of where that fund’s own capital originated.

Ohio vs. North Carolina, Side by Side

	North Carolina (HB 315)	Ohio (HB 105)
Model	Blanket prohibition	Disclosure regime + narrow capital-origin ban
What’s illegal	Any outcome-contingent litigation funding, period	Only funding traceable, directly or indirectly, to non-US capital
Domestic funding	Illegal — no carve-out for the commercial model	Legal — register, disclose after resolution, don’t steer the case
Trigger	The case’s venue (NC-venued, regardless of funder location)	The capital’s origin (look-through, regardless of funder location)
Reach	Every commercial funder active in NC courts — a blanket sweep	Narrower than NC’s sweep, but not small — the same capital-origin test catches foreign-headquartered funders that self-fund directly, plus any US fund whose LP base includes foreign capital, which describes many large funds
Retroactivity	Open question — “voids any contract in violation” may reach pre-existing agreements on in-flight cases	Forward-looking only — restricts entering into new agreements; no provision voiding ones already in place

Row after row, these are two bills solving different problems with different mechanisms, and Ohio’s actually leaves the commercial funding model intact for anyone who can show their capital is domestic.

Ohio Isn’t First — and Georgia’s Version May Be Broader

The “second state to restrict litigation finance” framing misses something bigger: Ohio isn’t even the first state with a foreign-capital-specific bar, just the one that got the misleading headline. Georgia’s SB 69, signed in April 2025 and effective January 1, 2026, makes registration mandatory for anyone doing litigation-financing business in the state — and separately bars anyone affiliated with a foreign adversary, foreign person, foreign principal, or sovereign wealth fund from ever obtaining that registration. Since registration is the gate to operating in Georgia at all, being disqualified from it doesn’t just block one deal; it excludes the fund from the state’s market entirely. Arizona’s SB 1215, effective the same window, separately bars a financier from funding any agreement “directly or indirectly financed by a foreign entity of concern.” Both are real, operative bans on foreign capital — not disclosure rules with a foreign-affiliation checkbox — and both were law before Ohio’s governor signed anything.

The two states don’t run on the same definition of “foreign,” despite reading similarly at a glance. Arizona’s is genuinely narrow: its statute defines “foreign country of concern” by reference to the actual federal adversary list (15 C.F.R. § 791.4) plus OFAC and State Department terrorist-organization designations — limited to China, Russia, Iran, North Korea, and similarly sanctioned entities. Georgia’s isn’t. Its statute separately defines “foreign person” as anyone who isn’t a US citizen, a US permanent resident, or a US-incorporated entity, and “foreign principal” as the government of, or an entity headquartered in, any country other than the United States — no adversary-nation qualifier anywhere. Its “sovereign wealth fund” is defined the same way, as any fund tied to any foreign principal, not just a hostile one. So Georgia’s ban actually runs on essentially the same broad “not domiciled in the US” standard Ohio uses — it was just doing it nine months before Ohio existed.

Georgia’s registration-gate mechanism matters here, and I want to be honest about what I don’t know rather than overstate it. Ohio’s test asks whether this specific claim was financed by non-US capital, so a fund can wall off individual deals. Georgia’s disqualification triggers on being, “in any capacity directly or indirectly related to” its financing business, affiliated with a foreign person or foreign principal — read literally, even a single foreign LP could be enough to trip it. I haven’t seen that reading tested in practice, and “affiliated with” isn’t itself defined in the statute, so I’m flagging how broad the underlying definitions are, not asserting how aggressively Georgia will actually enforce them.

So the honest count, as of this writing, is at least three states with an operative foreign-capital restriction — Georgia, Arizona, and Ohio — plus North Carolina’s separate blanket ban. Georgia’s is arguably the broadest of the group, not the narrowest, and it’s been on the books since before Ohio signed anything. The “what happens if a second or third state copies this” scenario isn’t a forecast anymore; some version of it already happened, twice, before Ohio.

It’s not just states, either. H.R. 2675, the “Protecting Our Courts from Foreign Manipulation Act,” already cleared the House Judiciary Committee on a 15-11 vote and has a formal committee report. It would make it unlawful for any foreign state or sovereign wealth fund to fund federal civil litigation, directly or indirectly, and unlawful for a party or counsel to take money sourced that way — the same look-through mechanism as Ohio’s test, but narrower in scope: state and sovereign-wealth money specifically, not Ohio’s or Georgia’s full “any foreign person” reach. It hasn’t passed the full House, let alone the Senate, but it’s further along than the Senate’s disclosure-only competitor, and it would apply nationwide in federal court if it became law.

The Parabellum Problem: Why Naming One Firm Is Misleading

The Law360 report ABA Journal cited named both Burford Capital and Parabellum Capital as funders the new law would affect. Burford checks out under the statute’s plain terms: its own domicile (Guernsey) is the capital’s domicile the law is testing, no look-through needed. Parabellum is different. It’s a New York-based firm, and to the extent it finances claims as a fund rather than off its own balance sheet, its own headquarters isn’t the relevant fact at all. If it’s implicated, it’s only through the indirect-financing, foreign-LP look-through described above — a different and much less certain claim than “headquartered abroad.”

Parabellum’s own SEC Form ADV does list foreign pension plans and sovereign wealth funds among its investor types, so the mechanism the law targets is real for them specifically. But that LP structure — foreign pensions and sovereign wealth capital sitting inside a US-domiciled litigation fund — is close to standard practice across large institutional funders generally, not a fact that distinguishes Parabellum from its peers. Naming one firm, sourced from a secondhand mention in someone else’s reporting, implies a distinction the underlying facts don’t actually support. The more accurate description is generic — funds that raise from foreign capital, which describes most large institutional funders — not a specific name that happened to get quoted first.

The Blind Spot Every LP Shares

Here’s the honest handicap on my own analysis, and it doesn’t resolve neatly: I don’t actually know whether the funds I’ve wired capital to carry foreign-sourced money in their own investor base. That’s not modesty — it’s structural. As a limited partner, I receive a capital account statement and periodic reporting on my own commitment. I don’t receive, and have no contractual right to, a look-through map of who else is in the fund or where their capital originated. Ohio’s test is aimed precisely at that layer — the fund’s own LP base — and I sit several links down the same chain, with visibility into none of the links above me.

That’s only fully survivable for Arizona’s version of this test, which reaches a short list of adversary-nation capital — a category most LP bases don’t touch, mine included as far as I know. Georgia’s is not that narrow: its foreign-person and foreign-principal definitions catch ordinary allied-country capital, the same “not domiciled in the US” standard Ohio uses, just enforced as a registration bar rather than a deal-by-deal test. So this isn’t a future risk contingent on some hypothetical next state — Georgia’s broad version has been law since January 2026. “Does my fund’s capital trace back to domestic sources” is already a real underwriting question for my own positions, not a hypothetical one — and it’s a question I currently cannot answer for myself, only one my GPs could answer if asked directly.

Can a Fund Structure Around This?

There’s a timing gap in the statute worth naming, because it’s the closest thing to a real loophole here: is an LP’s domicile tested once, at subscription, or continuously, whenever the fund enters a new funding agreement? A US-domiciled LP who later retires abroad and starts wiring capital calls from a foreign bank isn’t obviously grandfathered just because they were domestic when they signed on — if domicile is tested fresh at each new agreement, a fund with no process for re-checking LP status over the life of the fund could be financing new Ohio cases with capital it no longer actually knows to be domestic. An LP’s organic relocation isn’t evasion; nobody retires to Ecuador to launder capital into a litigation fund. But the ambiguity cuts both ways, and if it resolves toward “domicile locked at subscription,” that’s a gap a fund could lean on deliberately, not just drift into by accident. It’s not something I’ve seen any fund I’m in address directly, one way or the other.

Separate from that ambiguity, a GP has a fully deliberate structural option: deal-level segregation. Route Ohio-venued deals through a verified-domestic fund or a domestic-only co-invest vehicle — call it the domestic sleeve — and let the broader, multi-source capital handle everything outside restricted states. That’s real compliance, not a workaround — a claim financed entirely by domestic capital is clean under the statute. It only works, though, if the two pools of capital stay separate deal by deal. Let a domestic vehicle and a foreign-LP vehicle co-invest side by side in the very same Ohio claim, and that claim is foreign-financed again, just partly.

Segregation is the clean route; the timing gap above isn’t — it’s a live ambiguity, not a decision, until either the statute or a court settles which way domicile is tested. And segregation itself isn’t free: the domestic sleeve is only as clean as the GP’s ability to verify, and keep verifying, that every dollar in it stays domestic, which just relocates the visibility problem above to a smaller and presumably better-known pool of LPs. Ohio deals are now capped at whatever that sleeve can fund, not the platform’s full capital, and running a second parallel vehicle carries its own legal and accounting overhead. The honest compliance path costs something — it just moves the same verification problem down a layer instead of solving it.

Where I Land

Ohio regulated; it didn’t prohibit. Domestic litigation funding stays legal in Ohio — registered, disclosed after the fact, and barred from steering the case, but legal. That’s a fundamentally different outcome than North Carolina’s.
The capital look-through is the more interesting risk, not the “ban” headline. A test on where the money originated is harder to route around than a test on where the funder’s office sits, and it reaches through a fund’s own LP base — a layer I, as an LP, don’t get to see into.
The label did too much work again. “Foreign funder ban” was accurate for one of three provisions and misleading about the other two — the same lesson every post on this blog keeps relearning under a different heading: read the structure, not the word on the label.

I’m not treating Ohio as a reason to do anything differently with capital already committed — even counting Georgia and Arizona, this is still a handful of states, and the domestic-funding carve-out means the commercial model survives there largely intact. What I am doing is adding a question to the list I ask before a new fund commitment: alongside the fee stack, the liquidity terms, and now the venue and regulatory regime, I want to know roughly where a fund’s LP base draws its capital from. I don’t expect a straight answer. But I’d rather ask the question and get declined than assume the label on a bill like this one tells me anything about the structure underneath it.

Sources

“Ohio governor signs bill prohibiting foreign litigation funding,” ABA Journal (July 9, 2026), citing Law360
“Ohio Governor Signs Bill Requiring Litigation Finance Disclosure,” Bloomberg Law (July 2026)
“Ohio Legislature Seeks to Further Regulate Third Party Litigation Funding Agreements,” Tucker Ellis LLP client alert — bill-section detail (Ohio Rev. Code Ch. 1357, §§1357.06-.08)
Parabellum Capital, SEC Form ADV (investor-type disclosures, foreign pension plans and sovereign wealth funds)
Burford Capital Limited, 2025 Annual Report on Form 10-K (Feb. 26, 2026) — capital-source breakdown (balance sheet, BOF-C sovereign-wealth-fund arrangement, private funds); BOF-C and a related sidecar, both funded by a single sovereign wealth fund investor, represented ~30% of AUM as of Dec. 31, 2025
Georgia SB 69 (signed Apr. 21, 2025; effective Jan. 1, 2026) — bill text, Ga. Code § 7-10-2: bars registration or engaging in litigation financing by anyone affiliated with a designated foreign adversary (per 15 C.F.R. § 7.4) or with any “foreign person,” “foreign principal,” or “sovereign wealth fund” — terms the statute itself defines broadly, as anyone who isn’t a US citizen, US permanent resident, or US-incorporated entity, and any non-US government or government-owned entity, with no adversary-nation limitation
Arizona SB 1215 (effective Dec. 31, 2025) — bill text, Ariz. Rev. Stat. § 12-3451, § 12-3453(B): defines “foreign country of concern” by reference to 15 C.F.R. § 791.4 plus OFAC/State Department terrorist-organization designations, and bars a litigation financier from funding any agreement “directly or indirectly financed by a foreign entity of concern” so defined
H.R. 2675, “Protecting Our Courts from Foreign Manipulation Act” (119th Congress) — bill text, govinfo.gov, and House Report 119-700; passed House Judiciary Committee 15-11 (Rep. Ben Cline, R-VA)

Commentary and personal experience — not investment, legal, or tax advice. Investing carries risk, including total loss of capital. Always do your own due diligence.