Kansas Releases First Compromise between Commercial Legal Finance

Kansas may not be the first place people look for the next big legal-finance headline. It has wheat, barbecue, college basketball, and enough prairie sky to make your phone camera feel underqualified. But in 2025, Kansas became a surprisingly important stage for a national debate over commercial legal finance, also known as third-party litigation funding.

The center of the story is Substitute Senate Bill 54, a Kansas measure that created new disclosure rules for third-party litigation funding agreements in civil cases. More importantly, SB 54 was described by legal-finance observers as a rare compromise between two sides that usually treat each other like opposing counsel at a deposition: the commercial legal finance industry and business groups, including the U.S. Chamber of Commerce.

In plain English, Kansas did not ban litigation funding. It also did not give funders a free pass to stay completely hidden. Instead, the state built a middle lane: judges get to review funding agreements privately, opposing parties receive targeted disclosures, and certain confidentiality protections remain intact. In a policy debate famous for sharp elbows, Kansas basically said, “Everyone sit down. We’re going to use coasters.”

What Is Commercial Legal Finance?

Commercial legal finance is a financial arrangement in which a third party provides money to support litigation in exchange for a potential return tied to the outcome of the case. The funding may help pay attorney fees, expert witnesses, discovery costs, appeals, or other expenses connected to pursuing a claim.

For businesses and law firms, this can be useful because major litigation is expensive. A meritorious claim may be worth millions, but getting to judgment or settlement can require years of legal spending. Legal finance allows a company to move some of that cost and risk off its balance sheet. A smaller company suing a larger corporation, for example, may use funding to avoid being outspent into exhaustion.

Supporters argue that litigation funding can increase access to justice, improve bargaining power, and help parties pursue strong claims they might otherwise abandon. Critics argue that outside funding can create conflicts of interest, encourage unnecessary litigation, complicate settlement negotiations, and keep courts or opposing parties in the dark about who has a financial stake in the case.

That tension is exactly why Kansas SB 54 matters. The law tries to answer a difficult question: how much transparency is enough without turning funding disclosure into a litigation weapon?

Why Kansas SB 54 Became a National Talking Point

Kansas SB 54 amended the Kansas Code of Civil Procedure, specifically the discovery provisions in K.S.A. 60-226. The law requires a party that has entered into a third-party litigation funding agreement to provide the agreement to the court for in camera review. That means the judge reviews it privately rather than placing the entire agreement automatically into the hands of the opposing side.

This is the heart of the compromise. Business and tort-reform advocates wanted more transparency around litigation finance. Funders and many plaintiffs’ lawyers worried that broad disclosure could expose confidential strategy, settlement expectations, or pricing terms that have little to do with the merits of a case. Kansas split the difference by giving the court access to the agreement while requiring a sworn statement to other parties with specific categories of information.

Under SB 54, the disclosure must happen within 30 days after the legal action begins or within 30 days after the funding agreement is executed, whichever is later. That timeline matters because it prevents funding from being disclosed only after years of discovery battles, but it also recognizes that funding may be arranged after a lawsuit is already underway.

What Must Be Disclosed under the Kansas Compromise?

The Kansas law does not simply say, “Tell everyone everything.” Instead, it identifies specific items that must be disclosed in a sworn statement unless the parties stipulate otherwise or the court orders something different.

1. The Identity of Contracting Parties

The party must identify all contracting parties to the third-party litigation funding agreement. For legal entities, this includes information such as the place of formation. This helps courts and litigants understand who is financially connected to the litigation.

2. Control or Approval Rights

The disclosure must state whether the funding agreement gives the funder control or approval rights over litigation or settlement decisions. This is one of the most debated issues in legal finance. A funder that merely provides capital is one thing; a funder that can influence whether a case settles is another kettle of legal fish.

3. Access to Confidential Materials

The sworn statement must say whether the funder has the right to receive materials designated as confidential under a protective order, confidentiality agreement, or court order. This provision addresses the concern that sensitive business information, trade secrets, or personal data could move beyond the immediate parties to the lawsuit.

4. Relationships with Adverse Parties, Counsel, or the Court

The law requires disclosure of any known relationship between a third-party funder and the adverse party, adverse counsel, or the court. This is aimed at conflicts of interest. If the funder has a connection to someone on the other side, the court should not have to discover that fact by accident, smoke signal, or dramatic courtroom reveal.

5. The Nature of the Financial Interest

The statement must describe the nature of the funder’s financial interest, including whether it is recourse or non-recourse. In litigation finance, non-recourse funding generally means repayment depends on a successful outcome. If the case loses, the funder may not recover its investment.

6. Foreign Persons from Countries of Concern

SB 54 also requires disclosure of whether any foreign person from a foreign country of concern is directly or indirectly providing funding. If so, the name, address, and country of incorporation or registration must be disclosed. This provision reflects a growing national-security concern: that litigation finance could potentially be used by foreign actors to influence disputes involving sensitive technology, infrastructure, defense, or commercial information.

What Kansas Did Not Do

Just as important as what Kansas required is what it did not require. SB 54 states that information concerning a third-party litigation funding agreement is not admissible at trial merely because it was disclosed. In other words, disclosure does not automatically turn the funding arrangement into evidence for a jury.

The law also says nonprofit corporations or associations do not have to disclose their members or donors to comply with the rule. That provision appears designed to avoid sweeping advocacy groups, membership organizations, and donor-supported nonprofits into broad disclosure fights.

Finally, Kansas did not rewrite the entire discovery system. The statute makes clear that, except for the specific funding-disclosure rules, it does not otherwise modify the Kansas Rules of Civil Procedure or Rules of Evidence. That makes SB 54 more like a targeted valve than a full plumbing replacement.

Why the Compromise Matters for Businesses

For businesses, the Kansas approach provides a clearer playbook. Companies involved in funded litigation now know that funding agreements must be given to the court for private review and that certain facts must be disclosed to other parties. That predictability helps corporate counsel evaluate risk early.

Consider a mid-sized Kansas manufacturer suing a supplier over a major contract dispute. The manufacturer believes it has a strong claim, but the case will require expert testimony, document review, and possibly years of motion practice. Legal finance could allow the company to pursue the claim without draining operating cash. Under SB 54, the manufacturer would need to disclose the existence and key terms of the funding arrangement as required, but the full agreement would be reviewed by the court rather than automatically handed over for tactical use.

On the defense side, a company being sued may want to know whether an outside funder has settlement approval rights or access to confidential materials. That information can affect settlement strategy, protective-order negotiations, and conflict analysis. Kansas gives defendants some visibility while avoiding unlimited fishing expeditions.

Why the Compromise Matters for Funders

For funders, SB 54 is not exactly a love letter written in cursive. It imposes real disclosure obligations. But compared with more aggressive proposals that might require full production to all parties or broad discovery into funding strategy, Kansas offers a more manageable framework.

The in camera review model protects sensitive deal terms from unnecessary exposure. Funders often consider pricing, underwriting methods, portfolio strategy, and risk analysis to be commercially sensitive. If every funding agreement became a public or adversarial exhibit, the industry would argue that the disclosure rule itself could discourage financing of valid claims.

Kansas appears to recognize that concern. The law allows transparency where it is most relevantidentity, control, conflicts, confidentiality, financial interest, and foreign involvementwithout automatically converting every funding contract into a discovery piñata.

The Broader National Debate over Third-Party Litigation Funding

Kansas is part of a larger national trend. In recent years, state legislatures, federal lawmakers, business groups, courts, legal-finance companies, insurers, and civil-justice organizations have debated how litigation funding should be regulated. The issues usually fall into three buckets: transparency, control, and security.

Transparency advocates argue that courts and parties should know when a nonparty has a financial interest in the outcome of litigation. They say disclosure helps identify conflicts, protects confidential information, and gives judges a fuller picture of the case.

Legal-finance supporters respond that funding is often no more relevant than a company’s bank loan, insurance coverage, or internal litigation budget. They argue that forced disclosure can be abused by well-funded defendants to delay cases, demand irrelevant discovery, or pressure claimants into unfavorable settlements.

The national-security argument has also grown louder. Some policymakers worry that foreign entities could fund litigation to obtain discovery, influence disputes involving strategic industries, or pressure U.S. companies. Whether that risk is common or exceptional remains debated, but Kansas clearly included foreign-funding disclosure as part of its answer.

A Balanced Analysis: Smart Middle Ground or Temporary Truce?

The Kansas compromise is practical because it focuses on the information most likely to matter. A judge does not need a theatrical courtroom mystery about whether a funder exists. Opposing parties do not need to speculate endlessly about who may influence settlement. At the same time, a defendant does not automatically get every commercial detail of a funding agreement simply because funding exists.

That balance is the law’s strongest feature. It recognizes that legal finance can be legitimate while still accepting that secrecy can create problems. It also reduces the chance that disclosure fights will swallow the actual case. Litigation is already expensive enough; nobody needs a side quest where everyone spends six months arguing over the financial equivalent of a backstage pass.

Still, the law may raise implementation questions. What counts as a sufficient description of the “nature of the financial interest”? How detailed must the control-rights disclosure be? What happens if a funding agreement changes during the case? How will courts handle disputes over whether a document qualifies as a third-party litigation funding agreement? These questions will likely be answered through practice, judicial orders, and future litigation.

Practical Examples of How SB 54 Could Work

Example: A Patent Dispute

A small technology company sues a larger competitor for patent infringement. The smaller company uses commercial legal finance to pay expert witnesses and litigation expenses. Under Kansas-style disclosure, the court reviews the funding agreement privately. The opposing party receives a sworn statement identifying the funder, describing whether the funder has settlement approval rights, and stating whether the funder can access confidential materials.

Example: A Business Contract Case

A distributor files a breach-of-contract claim and obtains non-recourse funding. The defendant wants to know whether a funder is steering the case. The plaintiff must disclose whether the funder has control or approval rights. If the funder has no such rights, the sworn statement says so. That may narrow the dispute and keep the case focused on the contract rather than the financing.

Example: A Case Involving Sensitive Commercial Information

A lawsuit involves trade secrets or proprietary manufacturing data. If the funder has the right to receive confidential materials, SB 54 requires that fact to be disclosed. The court can then consider protective-order safeguards before sensitive documents circulate outside the core litigation team.

Experience-Based Lessons from the Kansas Legal Finance Compromise

One of the most useful ways to understand the Kansas compromise is to imagine the experience of the people who must actually live with it: lawyers, judges, business owners, funders, and clients trying to make rational decisions while litigation costs climb like a cat up a curtain.

For a plaintiff-side attorney, the practical experience begins with intake and funding strategy. If a client may seek outside financing, counsel must now think about disclosure from the first conversation. The funding agreement cannot be treated as a secret file that sits quietly in the background. Lawyers need to review whether the agreement gives the funder any approval rights, whether confidential materials may be shared, and whether any foreign ownership or funding issues exist. That means funding diligence becomes part of litigation planning, not an afterthought.

For defense counsel, the experience is different but equally important. SB 54 gives defense teams a structured way to learn whether a funder exists and whether that funder may influence the case. This can help with early settlement analysis. If the sworn statement says the funder has no settlement control, that may reduce one concern. If the funder does have approval rights, defense counsel may need to consider how that affects negotiation dynamics. A settlement conversation is already complicated; discovering that an unseen financial stakeholder has a vote can make it feel like negotiating with a conference room ghost.

For judges, the experience is likely to involve case management. In camera review gives the court access to the full agreement, but it also places responsibility on judges to decide when more disclosure is justified and when confidentiality should be preserved. Courts may need to develop consistent procedures for sealed submissions, protective orders, and disputes over whether the disclosure was complete. Over time, judges may become the referees who keep both sides from turning funding disclosure into either a black box or a boxing match.

For businesses, the lesson is straightforward: litigation finance can still be a useful tool, but it must be handled with governance discipline. A company considering funding should involve legal, finance, and compliance teams before signing. The agreement should be reviewed for control rights, confidentiality obligations, foreign ownership concerns, and reporting triggers. Good funding can support a strong claim. Sloppy funding paperwork can create avoidable distractions.

For funders, Kansas sends a market signal. The industry may be more likely to preserve legitimacy if it accepts targeted transparency rather than resisting every form of disclosure. A clean agreement that avoids improper control, respects protective orders, and clearly identifies financial interests is easier to defend. In the long run, transparency rules like SB 54 may help separate professional funders from arrangements that look vague, risky, or overly aggressive.

The broader experience lesson is that compromise legislation works best when it solves real procedural problems without pretending every funded case is suspicious. Kansas did not treat legal finance as a villain wearing a cape. It also did not pretend outside money never affects litigation behavior. Instead, it created a rule that says: disclose enough to protect fairness, preserve enough confidentiality to protect legitimate financing, and let courts manage the gray areas. That may not make everyone cheer, but in legal policy, a room full of mildly dissatisfied stakeholders is sometimes what success looks like.

Conclusion

Kansas SB 54 is important because it gives the national commercial legal finance debate something it has often lacked: a workable middle ground. The law recognizes that third-party litigation funding can help parties pursue legitimate claims, but it also acknowledges that courts and opposing parties need targeted information about outside financial interests.

By requiring in camera review, sworn disclosures, conflict-related information, confidentiality transparency, and foreign-funding details, Kansas created a model that other states may study closely. It is not a final answer to every question about litigation funding. No statute can magically remove every conflict, cost, or strategic maneuver from civil litigation. If one could, lawyers would have already billed six hours naming it.

But the Kansas compromise shows that legal-finance regulation does not have to be all-or-nothing. It can protect transparency without destroying confidentiality. It can support access to capital without ignoring conflicts. And it can give judges enough information to manage cases fairly while keeping the focus where it belongs: on the merits of the dispute.

Note: This article is based on publicly available Kansas legislative materials, statehouse reporting, legal-industry analysis, and stakeholder commentary regarding SB 54 and third-party litigation funding.